An OIC will allow you to relieve your tax liability for a less substantial amount than you owe to the government. In addition, it may be a viable choice if you cannot pay your whole tax debt or if doing so would cause financial trouble. The IRS analyzes your particular facts and circumstances to assess your eligibility for payment plans. This article will cover some of the basics of IRS repayment programs and fresh starts for individuals with tax debt.
Getting a payment plan for your tax debt arranged with the IRS can help you avoid extra interest and penalties. In addition, it will help you avoid having your future refunds offset. Tax debt can also significantly affect your credit score and eligibility for applying for loans. Therefore, if you cannot pay the whole amount owed, payment plans can help avoid problems in the future.
Moreover, when having a repayment plan with the IRS, you are in control of the monthly payment amount, and depending on the amount outstanding, you may have up to 72 or 84 months to settle your balance. The IRS is quite forgiving for individual taxpayers, especially first-time offenders.
The individual responsible for the tax debt may also pay the bill in full without further fees or penalties. Perhaps, the main benefit of an IRS installment plan is that it allows you to select how much you pay each month and offers you more time (up to 84 months) to pay your bill in full. Having the choice of a customized payment plan, rather than a predetermined invoiced monthly amount that may exceed what you can afford, boosts your chances of paying off your debt and reduces some of the stress.
The advantages of paying your taxes in time
First, paying your taxes in time will help you avoid paying additional interest and penalties.
In addition, you will eliminate missing out on future reimbursements, and any return is initially used to pay any back taxes owing. Finally, be aware that the IRS is authorized by law to levy fines on taxpayers who fail to submit a tax return or pay taxes owed by the deadline.
The remainder is subject to interest and a monthly late payment penalty if you cannot pay your tax liability by the initial filing deadline. There is also a penalty for failing to file a tax return, so you should file in time, even if you can’t pay your debt in full. It is always to your best advantage to pay in full as soon as possible to avoid extra fees.
Short-term Payment Plan
According to the IRS, if you cannot pay in full immediately, you may be eligible for an extension of up to 180 days. There is no cost for this complete payment; however, interest and any applicable penalties continue accumulating until you pay what you owe, which is very common in loans. Individuals may be able to set up a short-term payment plan by utilizing the Online Payment Agreement (OPA) application. We’d welcome the advice to contact a tax consultant in the case of significant tax debt to the IRS.
Fresh start program
Tax debt brings significant pressure on people, and it can be very stressful to repay your debt to the IRS. However, nowadays, there are many ways to facilitate repayment, and the IRS has become rather forgiving with first-time tax offenders.
The IRS initially created the ‘fresh start program’ to provide tax assistance to people with tax debt, offering relief to those in debt. However, the program has particular criteria, and it is often difficult to apply to this program.
The IRS fresh start tax program is a breath of fresh air for those who have outstanding tax bills and are already drowning in bills we can’t pay. Those with tax problems who qualify for the IRS Fresh Start initiative may be able to lower their tax liability by up to 90%. An amount like that can be life-changing to many people who remain in debt.
If you remain in debt and would like to apply for the fresh start program, we invite you to have a call with one of our tax consultants or to look at our information on the fresh start program.
Who Is Eligible?
The most general principles specify that you are qualified to apply for a compromise offer if you:
– Filed all applicable tax filings and made all required anticipated payments.
– Are not currently involved in a bankruptcy process
– Have a valid extension for a current-year return (if applying for the current year)
– An employer who has made tax deposits for the current and previous two quarters.