Wednesday, April 14, 2004
Can’t pay all your taxes now? IRS offers options
If thoughts of April 15 are keeping you up at night worrying about how to pay all you owe to Uncle Sam, rest easy: According to the IRS Web site, the agency offers several options to businesses that need to spread out their tax payments.
First, a caveat: All of the alternative payment options have strings attached (including additional costs). So your best course of action is to pay all you owe, when you owe it. But if that’s simply not possible, you might qualify for one of these other options:
1.monthly payments through an installment agreement;
2.a temporary delay, or if the situation warrants it, your case might be deemed “a significant hardship”; or
applying for an “offer in compromise.”
3.Paying in installments
As you might expect, an installment agreement lets you break up your total tax liability into several smaller, more manageable payments — usually, equal monthly payments. If you already have an installment agreement for previous tax debts, the IRS might include all of the amounts you now owe into one installment agreement.
But here’s the catch with installment agreements: They may be more costly than borrowing the money you need to pay your taxes in full. That’s because the IRS charges not only interest but also penalties on the tax you owe. In addition, as you make installment payments, the IRS continues to charge interest and penalties on the unpaid portion of your debt. The IRS suggests that a bank loan or a cash advance on your credit card might cost you less than the combined penalties and interest the IRS charges.
Another catch is that the IRS might still file a “Notice of Federal Tax Lien” until you make a final payment.
To be eligible for an installment agreement, you have to file all of your tax returns that are due. Apply by calling the number on your tax bill.
For more information about installment agreements, see the “frequently asked questions” on the IRS Web site.
Delaying payment
If the IRS determines your business cannot pay any of its taxes now, they may grant you a temporary delay until your financial situation improves. However, penalties and interest will be charged until you pay the full amount. And, as with an installment agreement, they might also file a Notice of Federal Tax Lien.
‘Offer in compromise’ is a last-ditch solution
Suppose you’ve exhausted every possible way of paying your taxes, to no avail. Your last resort is to file an “offer in comprise” (OIC). This is an agreement through which the IRS will accept less than full payment of your taxes. An OIC is granted only under limited circumstances. (The IRS says it resolves less than 1% of all balance-due accounts through the OIC program.)
A tax debt can be legally compromised for one of the following reasons:
1.Doubt exists that the assessed tax is correct.
2.Doubt exists that you could ever pay the full amount of tax owed.
3.There is no doubt that the tax is correct or that the amount owed could be collected, but an exceptional circumstance exists that allows the IRS to consider an OIC. The taxpayer must demonstrate that collection of the tax would create an economic hardship or would be unfair and inequitable.
To be considered for an OIC, you must have filed all required federal tax returns; have filed and payed any required employment tax returns on time for the two quarters prior to filing the OIC and be current with deposits for the quarter in which the OIC was filed; and not be a debtor in a bankruptcy case. You will also have to pay a $150 filing fee (except in certain circumstances), and of course, use the appropriate forms.
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If thoughts of April 15 are keeping you up at night worrying about how to pay all you owe to Uncle Sam, rest easy: According to the IRS Web site, the agency offers several options to businesses that need to spread out their tax payments.
First, a caveat: All of the alternative payment options have strings attached (including additional costs). So your best course of action is to pay all you owe, when you owe it. But if that’s simply not possible, you might qualify for one of these other options:
1.monthly payments through an installment agreement;
2.a temporary delay, or if the situation warrants it, your case might be deemed “a significant hardship”; or
applying for an “offer in compromise.”
3.Paying in installments
As you might expect, an installment agreement lets you break up your total tax liability into several smaller, more manageable payments — usually, equal monthly payments. If you already have an installment agreement for previous tax debts, the IRS might include all of the amounts you now owe into one installment agreement.
But here’s the catch with installment agreements: They may be more costly than borrowing the money you need to pay your taxes in full. That’s because the IRS charges not only interest but also penalties on the tax you owe. In addition, as you make installment payments, the IRS continues to charge interest and penalties on the unpaid portion of your debt. The IRS suggests that a bank loan or a cash advance on your credit card might cost you less than the combined penalties and interest the IRS charges.
Another catch is that the IRS might still file a “Notice of Federal Tax Lien” until you make a final payment.
To be eligible for an installment agreement, you have to file all of your tax returns that are due. Apply by calling the number on your tax bill.
For more information about installment agreements, see the “frequently asked questions” on the IRS Web site.
Delaying payment
If the IRS determines your business cannot pay any of its taxes now, they may grant you a temporary delay until your financial situation improves. However, penalties and interest will be charged until you pay the full amount. And, as with an installment agreement, they might also file a Notice of Federal Tax Lien.
‘Offer in compromise’ is a last-ditch solution
Suppose you’ve exhausted every possible way of paying your taxes, to no avail. Your last resort is to file an “offer in comprise” (OIC). This is an agreement through which the IRS will accept less than full payment of your taxes. An OIC is granted only under limited circumstances. (The IRS says it resolves less than 1% of all balance-due accounts through the OIC program.)
A tax debt can be legally compromised for one of the following reasons:
1.Doubt exists that the assessed tax is correct.
2.Doubt exists that you could ever pay the full amount of tax owed.
3.There is no doubt that the tax is correct or that the amount owed could be collected, but an exceptional circumstance exists that allows the IRS to consider an OIC. The taxpayer must demonstrate that collection of the tax would create an economic hardship or would be unfair and inequitable.
To be considered for an OIC, you must have filed all required federal tax returns; have filed and payed any required employment tax returns on time for the two quarters prior to filing the OIC and be current with deposits for the quarter in which the OIC was filed; and not be a debtor in a bankruptcy case. You will also have to pay a $150 filing fee (except in certain circumstances), and of course, use the appropriate forms.
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Ecommerce
Financial
B2B
Free Evaluation
Source:http://www.cbia.com
