Once upon a time, you struggled with a massive tax debt, wondering how you would pay it. Then, you signed up for one of the tax relief programs, such as an Installment Agreement, Penalty Abatement, or Offer in Compromise, and now you have a solid handle on your tax debt.
As you look at the calendar, you might notice that the tax deadline of April 15 (April 17 for 2018) quickly approaches. Do not become complacent; make sure that you file your tax return and pay your taxes. Otherwise, you might find your tax relief settlement revoked.
Most people can sign up for an Installment Agreement, which allows you to pay down your tax overtime with a monthly fee that you agree on. You still will have penalty fees and interest, but it is lower than if you just didn’t pay your bill. Additionally, you do not have to worry about collective action, such as a lien or a wage garnishment, as long as you continue to pay your monthly payment on time each month.
Additionally, you must file and pay all required tax returns in full and on time throughout the life of the Installment Agreement. Otherwise, you will end up forfeiting the payments. If you cannot pay your current tax liability, you can apply to renegotiate your Installment Agreement to include the new bill.
Offer in Compromise
An Offer in Compromise is a tax relief program in which you negotiate to pay a smaller amount than what you owe, and the IRS forgives the rest of your debt. It is tough to get, with about 40 percent of applicants getting a successful outcome. The IRS considers your income, expenses, assets, and overall ability to pay when determining whether you can get it.
To be eligible for an Offer in Compromise, you must have filed all required tax returns and have paid any other tax payments required of you. The only exception is for the current tax year, as long as you have filed the appropriate form for an extension to file.
Once you have settled on an offer, you must remain in compliance with your tax returns and payments for five years after the acceptance of your offer in compromise. If you end up skipping a payment for the offer in compromise or do not file a tax return or make the necessary payments, then you might find your offer rejected, and you once again owe the original tax debt.
For some people, the penalty and interest fees add up, turning a hefty tax bill into one that they cannot afford. Those who have reasonable cause (beyond just not being able to afford to pay) and first-time offenders have the opportunity to have the penalty fees waived.
To qualify for penalty abatement, you must be up to date on all of your tax returns and payments or have arranged to pay any outstanding tax payments.
The Importance of Compliance
As you can see, it is necessary to be in compliant with your tax returns and tax payments in order to qualify for and maintain your tax relief settlement. Therefore, you want to ensure that you get your tax return filed by the April due date, unless you have filed for an extension until October. If you have filed for an extension, be sure to still pay an estimated tax that equals at least 90 percent of your total tax liability, or you might find that you will no longer be in compliant.
If you have yet to negotiate a tax relief settlement with one of these programs or others, such as Innocent Spouse Relief, then call Fidelity Tax Relief at 877-372-2520. One of our tax professionals will work with you to find a solution to your tax debt.