Do you owe taxes and cannot pay now?

The IRS announced a major expansion of its “Fresh Start” initiative to help struggling taxpayers by providing:

• Payment plans – more taxpayers can apply without financial statements.

• Offer in Compromise OIC – IRS added flexible terms and guidelines for higher collection potential.

We will explore OIC in our next article. When you owe taxes and cannot pay all now, more payments plan options.

Short-Term Payment Plan or Full Payment Agreement Up To 120-Days

• Consider short-term payment plan if you cannot pay immediately but you can pay in full up to 120-days.

• There is no user fee, but penalties and interest continues until owed liabilities are paid in full.

In-Business Trust Fund Express Installment Agreement or IBTF-Express IA

• For small businesses with employees may qualify for IBTF-Express IA.

• Application do not require financial statement and verification.

Installment Agreement Payments Plan

• An installment agreement is an alternative if you cannot pay all of your tax debts when due.

• Fresh Start provisions allow you to use streamlined installment agreements to catch up on back taxes.

• The threshold for using an installment agreement without having to supply the IRS with a financial statements has been increased to$50,000 from $25,000. The preparation of financial statements requires time and could be costly if you hire a professional.

• Taxpayers who owe up to $50,000 in back taxes will now be able to enter into a streamlined agreement with the IRS that stretches the payment out over a series of years.

• The streamlined installment agreement terms has been increased to 72 months from 60 months.

• Taxpayers looking for installment agreements exceeding $50,000 will still need to supply Collection Information Statement Form 433-A and Form 433-B for businesses.

• TIP: If you owe more than $50,000, pay it down to $50,000 to take advantage of this payment option.

• You must agree to monthly direct debit payments.

• You can go to the On-line Payment Agreement OPA page on IRS.gov to set up a payment plan.

• Penalties are reduced but interest continues to accrue on the outstanding balance.

These initiatives are intended to aid businesses and individuals pay back taxes with less burdens. These changes supplement a number of efforts to aid taxpayers who are struggling. Former IRS Commissioner Doug Shulman stated that the main goal is to help people meet their obligations and get back on their feet financially.

TIPS – Here are some observations from experience of processing OICs and Payment Plans:

• If you are young, healthy, and have good earning potential, your offer  will possibly get rejected by the IRS.

• You have a better chance at an OIC if you are retired, do not have sufficient assets, have existing serious medical condition, or are simply surviving now and in the future,.

• If in doubt, give it a try even if the chance that your offer may be rejected is high.

• Dual approach could work- apply for both Offer in Compromise and Installment Agreement. If your OIC fails, then proceed with an Installment agreement.

• The advantage when you do dual approach: You prepare documents and forms only once for both OIC and payments plan. It will save you time, money, and stress as well as tax representation fees.

• Finally, convince the IRS that they are better off getting something from you now, rather than for nothing when you are permanently gone… something beyond your control.

In accordance with IRS Circular 230, this communication is not to be considered a “covered opinion” or other written tax advice and should not be relied upon for IRS audit, tax dispute, or any other purpose.

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Sy Al-os Accountancy Corporation provides accounting and tax services to individuals, corporations, LLCs and business entities. The Firm has a niche in defending taxpayers audited by the IRS and other governmental agencies.