Are the back tax notifications piling up in your mailbox? Or did you end up with an unexpectedly heavy tax bill after filing this year? When faced with loads of tax debt, it can feel like you’ll be enslaved to the government until the day you die. Thankfully, the IRS offers a way to pay them back over time. An IRS installment agreement spreads your debt over a set number of months while protecting you from serious collection tactics like liens, garnishments, and property seizures.
Here are five types of IRS installment agreements to make dealing with back taxes a little less terrible:
1. Guaranteed Installment Agreement
- Qualification level: Easy.
- Tax debt amount: $10,000 or less.
- You must meet the following criteria:
- Your past tax returns have been filed.
- The previous five years’ returns have not been filed late or paid late.
- You haven’t used an Installment Agreement plan in the previous five years.
- The entire tax debt amount will be paid in three years or less.
- You don’t need to provide a full financial statement to the IRS.
- Why apply: It’s called “guaranteed” because the IRS will most likely let you into this agreement if you meet the following criteria, and it’s simple to apply for yourself.
2. Streamlined Installment Agreement
- Qualification level: Easy.
- Tax debt amount: up to $50,000.
- Thanks to the IRS Fresh Start Initiative, this is similar to the Guaranteed Installment Agreement but for those with a greater debt (up to $50,000). The payments can span for up to 72 months.
- You don’t need to provide a full financial statement to the IRS.
- Why we love it: Streamlined has the simplicity of Guaranteed but with a higher debt cap and longer time to pay off (and no federal liens).
3. Installment Agreement for Tax Debt of Over $50,000
- Qualification level: Difficult.
- Tax debt amount: Over $50,000.
- The IRS will conduct a thorough review of your financial situation to ensure the earliest payment of tax debt. You must provide a detailed financial statement.
- Why apply: You can pay your large debt amount over an extended period of time.
- TIP: Enlist the help of a tax professional to make sure you provide the IRS with all necessary financial information on a Collection Information Statement (Form 433-F or Form 433-A)
4. Partial Payment Installment Agreement
- Qualification level: Difficult.
- Tax debt amount: Varies; unaffordable to you.
- Why apply: If you can’t afford the minimum payment for guaranteed or streamlined installment agreements, a partial payment allows for a longer repayment term. The IRS will reevaluate your financial position (including equity in assets) every two years to see if your fortunes have changed.
- The IRS will file a federal tax lien to protect its interests in collecting the debt. You may be required to sell property and assets to pay off your tax debt.
- TIP: Enlist the help of a tax professional to make sure you provide the IRS with all necessary financial information.
5. Settlement Agreement (Offer in Compromise)
- Qualification level: Extremely difficult.
- Tax debt amount: Varies; unaffordable to you.
- Why apply: This agreement allows you to pay less than what you owe to the IRS. It is best if you’re in a destitute situation.
- TIP: Enlist the help of a tax professional to see if you qualify for Offer in Compromise and to help you start the vigorous application process.
Let’s Make a Deal (with the IRS)
No one said paying back taxes would be easy. Dealing with the IRS isn’t any better.
Taxpayer history is the primary factor in determining what kind of IRS installment agreements you qualify for. If you’ve made a payment plan in the past with the IRS that didn’t work out too well, the IRS may be less likely to give you another chance. Additionally, the installment agreements above are all for personal tax debt. Agreements for business tax debt are a whole new ballgame in comparison.
No matter what your situation is, the best way to find a positive outcome when seeking an IRS installment agreement is to contact a tax professional. Tax experts like ours exist to help taxpayers like you who fall into common, yet unfortunate tax situations get out of the pit. Our tax professionals have consulted on over $16 billion in tax debt since 2007 and help hundreds of taxpayers score IRS installment agreements every day. For a free consultation on IRS agreements, give us a call today.
Tax Day 2019 has come and gone. The deadline for filing your taxes was this past Monday, April 15 (unless you are a resident of Maine or Massachusetts, in which case your deadline was this past Wednesday, April 17). If you forgot to file or request an extension in time, you’re now officially late in filing your 2018 taxes. But what does that even mean? What happens if you forgot to file taxes on time? We’ll walk you through the consequences of not filing on time and what you can do about it.
If you forgot to file, you could face the pesky failure-to-file penalty.
The IRS may assess the failure-to-file penalty to any taxpayer who does not file by the deadline and who has an outstanding tax balance. The failure-to-file penalty is 5 percent of your unpaid taxes for each month your tax return is late (up to 25 percent). You’ll also get plenty of reminders from the IRS to file your taxes.
Think you can avoid this penalty by filing today? Unfortunately, it starts accruing the day after the deadline.
If you owe taxes, the IRS could hit you with extra penalties, interest, and worse.
Forgot to file taxes and have an outstanding tax bill? If you didn’t pay the IRS the full amount of taxes owed, you could be facing a failure-to-pay penalty. If you’ve got the failure-to-file and the failure-to-pay penalties running at the same time, they’ll cap at 5 percent of your unpaid taxes per month.
As far as penalties go though, this year you could be in luck. More people than ever are expected to have underpaid the IRS, thanks to the reform affecting 2018 taxes. To help combat this issue, the IRS has expanded their relief from their underpayment penalties.
If this isn’t your first year forgetting to file your taxes, your consequences could be a lot more severe. In addition to even more penalties, you could face wage garnishment and other levies. The IRS could even take you to court. Now luckily, the IRS won’t take those drastic actions without warning, but it’s still important to remember how serious the IRS can be.
Owe more than you can pay? There are always options like a payment plan or an offer in compromise that you could qualify for.
Say goodbye to your refund until you file.
Got money waiting for you in the form of a tax refund? The good news is that you won’t face the failure-to-file penalty.
The bad news: Unless you file your taxes within three years of the corresponding tax filing deadline, you can kiss that cash good-bye. In 2013, taxpayers who didn’t file left $1 billion in unclaimed federal income tax refunds on the table. And that’s generally cash that people worked hard for but ended up overpaying the government with.
If your choice is filing ASAP or losing money, you’ll want to choose filing every time.
The IRS will consider reasonable causes for not filing by the deadline.
If you’ve got a good reason for not filing your taxes on time, the IRS might hear you out. They must determine whether your reason for not filing on time is sound and established (with proper documentation) before waiving or reducing any penalties. These reasons include:
- Death, serious illness, incapacitation or other absence of the taxpayer or an immediate family member.
- Fire, natural disasters, casualty, or other similar disturbances.
- Inability to get important tax records.
- Other reason that shows you genuinely attempted to meet your tax obligations but could not.
Note that not having enough money to pay isn’t a listed reason for not filing or paying on time. The only exception here is if the reason you don’t have the money to pay is similar to the ones above.
Even if you have a good reason, the IRS typically doesn’t waive any accrued interest on your balance. If the IRS charged interest on a penalty that they are reducing or removing due to reasonable cause, they can reduce or remove that specific interest.
So, what should you do if you forgot to file taxes?
Easy – you should file those taxes ASAP. The sooner you file, the sooner you get your refund. And if you owe the IRS money, the sooner you file, the lower your tax bill.
When paying right away isn’t an option, tax pros can help negotiate with the IRS on your behalf. Our tax professionals are always available to ensure your unfiled taxes are handled quickly and accurately. Tax Defense Network by MoneySolver has been helping individuals and businesses deal with tax issues with the IRS for over a decade, and there’s little we haven’t been able to help with. If your situation is fixable without our services, we’ll let you know that up front, too. Start with a free consultation today.
It’s not just you; it really does feel like the first few months of 2019 have flown by. We’re finding it hard to believe the federal tax deadline is next week! If you’re in the same boat and don’t know how you’re going to get your taxes filed in time, there’s no need to stress. A simple tax extension can give you the time you need. And rest assured, lots of people will need one this year. In fact, a record 14.6 million requests for filing extensions are expected this tax season. So, if you’re not sure how to file a tax extension, here’s our guide to getting that extension submitted on time.
When Is the Tax Deadline Again?
Unless you live in Maine or Massachusetts, you have until April 15, 2019, to file your federal tax returns. If you are a resident of Maine or Massachusetts, you’ve got until April 17 to file thanks to two legal holidays.
What Happens If I Don’t File a Tax Extension?
If you don’t file your tax return by the due date (or by the extended due date if you had an approved extension), you face the wrath of the IRS in the form of the failure-to-file penalty. This is a five percent per month penalty on any unpaid tax balance you have. This penalty is charged each month (or even part of a month) that the return is late, for up to five months. Even if you file your return less than 30 days late, the failure-to-file penalty will apply for the whole month.
Didn’t file your extension on time and owe taxes? You can also receive a failure-to-pay penalty along with your failure-to-file penalty. If you have both these penalties running simultaneously, the IRS limits their combination to 5 percent overall. But let’s be honest: no one wants two IRS penalties at the same time.
Some people are afraid to file an extension because they think it could trigger an audit. However, the IRS encourages taxpayers to file for an extension if needed to help reduce tax-filing errors.
OK, but How Do I File a Tax Extension?
You can file for a six-month tax extension using Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. The IRS will review and hopefully approve your extension. Once you’ve gotten that approval, you’ll have until Oct. 15, 2019, to file your federal tax return.
You can either fill this form out and mail it to the IRS or you can submit it using a Free File software company. Some of these companies will also help you estimate what you’ll owe the IRS, so you can pay on time.
Whichever way you choose to submit Form 4868, make sure you do so by the due date of your return.
Remember: An extension to file is not an extension to pay.
Just because you have an extension on filing your taxes doesn’t mean you’ll have an extension on paying any taxes you owe this year.
What does this mean for you? If you don’t pay the taxes you owe by the April deadline, you stand to face the interest charged on any unpaid tax balance. The IRS might also hit you with an underpayment penalty or a failure-to-pay penalty on any overdue taxes. However, some taxpayers may have a break from these penalties because of the recent tax reform. The Treasury Department has stated that they will allow taxpayers who paid at least 80 percent of their tax bill during the year to avoid paying penalties.
Also, if you’ve gotten an extension and you pay at least 80 percent of your actual tax liability by the actual April tax deadline, you can avoid a failure-to-pay penalty. How? You’ll need to make sure you pay the remaining balance by your extended due date of Oct. 15.
Even if you do owe, filing your extension will at least help you dodge a failure-to-file penalty. And since the failure-to-file penalty is usually higher than the failure-to-pay penalty, you’ll be dodging a much more financially-burdening bullet.
Will I Still Get My Tax Refund?
Unfortunately, no tax return = no refund. You won’t get your refund until you file your return. The IRS must process your return before determining if you’re due a refund.
Don’t let the confusing tax law changes cause you to incur a failure-to-file penalty. Especially if you’re a business owner, you’ll want to make sure you’re taking the time to make the most of your taxes. The best way to get some extra time is by filing an extension today.
Need help filing your return and maximizing your deductions? Our tax professionals are ready to help.
Back taxes are a slippery slope. They can come about when you don’t pay enough on your taxes, when you fail to report all your income, or when you don’t file a tax return at all. No matter how unintentional, that first step down that back taxes path can seriously cost you. And it can be frightening to try and figure out how deep you’ve gotten once you’ve fallen. So how do you know when you need to reach out for back taxes help? What red flags indicate that you’ve hit the point where expert help in filing your back taxes is your best option?
If any of the following signs ring true for you, you may need professional back taxes help.
1. IRS notices have piled up in your mailbox.
If you have a stack of notices from the IRS about your back taxes, chances are it is time to do something about it. Instead of throwing the next CP14 notice on top of the rest (or worse, tossing it in the trash), reach out for help to put a stop to the endless stream of IRS letters.
2. The IRS has sent debt collectors after you.
While the IRS will stick to sending you notices in the mail, they can assign your case to a private debt collection agency. They will let you know if they do this. However, once it’s done, collectors will bombard you with phone calls and messages about your outstanding debt with the IRS. And as we all know, collections agents can be relentless.
3. Your passport is in jeopardy.
Believe it or not, delinquent tax debt can cause the IRS to deny, limit, or even revoke your passport. Say sayonara to all your travel plans until you’ve worked out a solution to your back tax issue. Once you’ve paid back your debt or made plans to pay back your debt, the IRS can reinstate your passport but it may not be overnight.
4. You lose your refund, your property, or part of your paycheck.
Refusing to pay your back taxes can result in a tax levy, which means that the government could take your property to satisfy your outstanding debt. They can also take your tax refund and even levy your wages in an attempt to regain what is due to them. While the IRS will send you notices in the mail beforehand, a levy can still shake you to your core. That’s why it might be best to consult a professional to help you fix your back tax issue. Keep your property where it belongs – in your hands.
5. The sum of what you owe (plus any penalties) is much higher than you can afford.
If you’ve got back taxes but you can afford your total balance, your best bet is to bite the bullet and make that tax payment. However, this isn’t often the case. Sometimes your overall balance due to the IRS (including any pesky penalties) is much more than you have available in your bank account. In that case, it’s in your best interest to seek out a tax pro who can help you resolve your back tax issue with a solution like debt forgiveness or a payment plan.
If you recognize any of these signs in your life, it may be time to reach out for back tax help. The longer you wait, the worse it can get. Give our tax experts a call today to take the first step towards freedom from back taxes.
Garnishment. The first thing that comes to mind when you hear that word might be a decorative sprig of parsley next to a fancy plate of porkchop. Or you may imagine a crisp stick of celery in a tasty Bloody Mary. Those types of garnishes are delightful and enhance your meal or drink. So, what is wage garnishment? Is it like adding some cilantro to your paycheck? Unfortunately, the truth is far less pleasant.
What wage garnishment is
Wage garnishment is when your earnings are legally withheld by your employer to pay an outstanding debt. A typical example of wage garnishment would be the IRS levying your wages in an attempt to repay your outstanding tax debt balance with them.
There are different reasons for wage garnishment outside tax debt. These include garnishment for student loan debt, child support, and consumer debt.
Wage garnishment isn’t a rare occurrence. In ADP RI’s 2016 study, one in 14 workers was found to be carrying a wage garnishment.
How wage garnishment starts
Wage garnishment starts when a creditor requires your employer to withhold a certain amount of money from your paycheck. Your employer then pays those withheld wages to the person or entity with whom you have a debt.
Some garnishments begin with a court order. But with federal student loans, back taxes, or child support, no court order is needed to begin garnishing your wages.
You should receive notice before the garnishment begins. For instance, the IRS will send you letters notifying you of their impending actions. These notices will often give you time to resolve the issue before the garnishment begins.
While garnishment is usually started once you’ve had an outstanding debt and received notice, there was a recent proposal in the Senate to legalize mandatory wage garnishment for anyone with student loan debt. If that proposal passes, employers would automatically deduct payments from the paychecks of employees who have federal student loans.
The rights you have in the face of wage garnishment
While wage garnishment can leave you feeling helpless, you still have some important rights:
- You must receive legal notification about the garnishment.
- There is a limit to how much of your wages can be garnished in a week. This can vary depending on who is garnishing your wages, where you live, how many children you have, and whether you’re head of household. If your wages are being garnished by the IRS, they offer a helpful table for figuring out the amount exempt from their wage levies.
- You cannot be fired from employment because your wages are being garnished for any one debt. However, there is not necessarily protection from employment termination if your wages are being garnished for more than one debt.
- You can dispute your garnishment if you believe you don’t owe the debt. This may require a lengthy appeals process, especially if your wages are being garnished for tax debt.
How to stop garnishment – and get your life back on track
Now that you know what wage garnishment is and how it starts, you’re one step closer to putting a stop to it.
Wage garnishment typically does not stop until you pay the entire debt balance in full. For IRS back tax issues, this balance can include any interest, penalties, and collection fees accrued over the course of your debt.
If you do not have enough money to pay the debt in full, you can always talk to a professional about the other resolution options that exist for you. With IRS wage garnishment, a tax expert can help you figure out a solution like a payment plan that works for both you and the IRS. This sort of resolution will result in the IRS releasing your paycheck garnishment. No wage garnishment means you getting back to living your life more comfortably.
It’s happened. You open your mailbox and there it is – the dreaded letter from the IRS stating that they’ve selected your tax return for “examination.” The IRS letter contains detailed instructions, but it doesn’t come with a translator. Before you get too worried about your tax audit fate, take a few deep breaths. We’ve got you covered. Here’s everything you need to know about audits and how tax audit help could help you through this distressing experience.
What does an audit include?
When the IRS audits you, they’re saying that they want to examine your return more closely. They’re looking to ensure all the information you provided is correct. There are three different audit types to look out for:
- Correspondence audits: Audits conducted mainly by mail.
- Office/desk audits: In-person audits at an IRS office.
- Field audits: In-person audits that are either at your home or business.
The majority of IRS audits for fiscal year 2017 were correspondence audits at 70.8 percent of all audits.
What triggers an audit?
Audits are typically triggered when something on your return is abnormal or “off” to the IRS. This can be as simple as making a typo or error, earning more money than you have in previous years, or forgetting to report cryptocurrency. But the cause can also be more complicated, like a self-employment tax issue.
Other audit causes include:
- Failing to report taxable income
- Having three consecutive years of business losses if you’re self-employed
- This isn’t likely for corporations, but it’s still possible.
- Using round numbers on your return
- Deducting 100 percent of a business car
The most interesting audit cause? The IRS selects a very small amount of returns for audit at random as part of the National Research Program they conduct. That’s why most tax preparers cannot offer you an entirely “audit-free” return. Even with a completely clean return, there’s always a possibility that you could face an audit.
What can come from an audit?
There are three ways to conclude an audit:
- Accepted – the IRS proposes changes that you understand and accept.
- Disagreed – the IRS proposes changes that you understand but don’t agree with completely.
- No change – no changes come from your audit.
Sometimes the changes that the IRS proposes will include an increase in your tax bill. However, it’s not always the case that you’ll owe money after an audit brings about changes. In almost 34,000 instances out of the total 1.1 million tax returns audited in 2016, taxpayers received additional refunds totaling more than $60 billion.
No matter what conclusion comes from your audit, the biggest key is to watch out for deadlines. The IRS gives you a specific amount of time to respond and if you don’t respond, they will still post the changes.
Why turn to professional tax audit help?
There’s nothing that says you can’t take on an audit on your own, especially if it’s a correspondence audit. With these types of audits, you can usually complete them by sending the IRS whatever they’ve asked for. But if they aren’t satisfied with what you’ve sent or if you don’t have what they want, it could benefit you to seek out professional tax audit help.
You have certain taxpayer rights, which extend to the right to retain representation. This means that you have the right to have an authorized representative of your choosing to represent you with the IRS. Dealing with the IRS is far from your favorite activity. Luckily, tax audit reps like ours have experience in dealing with the IRS. Experienced pros know the right questions to ask. They can even translate confusing IRS terminology into phrases normal people can understand. With tax audit help and representation, you will rarely have to talk to the IRS. We’ll handle all the legwork for you and spare you the droning IRS on-hold music.
Is tax audit help expensive?
You may think you’re saving money by skimping on tax audit representation. But it can be even more financially damaging to receive a hefty IRS bill for tax deficiencies and penalties you may not fully understand. A representative who is well versed in tax code should be able to keep you from paying more than is necessary.
So give us a call today. You’ll have a free consultation with one of our experienced tax audit pros to get to the root of your audit issue. We’re always transparent about what to expect when it comes to our process and pricing.