Can I Pay Installments on Federal Income Taxes I Owe If I Can't Afford to Pay it All at Once?
Despite the IRS being slammed right now due to COVID-19, millions of Americans still owe money to the IRS in back taxes for previous years and they’ll increasingly find themselves unable to pay up all at once.
In this article, we walk you through IRS installment agreements and what to do if you can’t afford to pay your back taxes.
Though paying your taxes through an installment agreement is just one of many tax relief options, you likely have other options and might be able to settle with the IRS or lower your amount owed. We encourage you to reach out to our firm for a tax relief consultation to determine your options.
HOW THE IRS IS DEALING WITH COLLECTIONS DURING COVID-19
COVID-19 forced a lot of things to shut down or modify how they do business, including the IRS.
Not only are they busy dealing with processing their usual tax returns, the IRS was tasked with processing the stimulus payments for millions of Americans.
To top it all off, they’re scrambling trying to adjust to the new filing deadline, and a lot of their workforce is working from home, making things slower than usual.
Because of this, and due to the economic hardship millions of Americans are experiencing, the IRS announced it’s “People First Initiative”.
The IRS is pursuing unprecedented actions to ease the burden on people facing tax issues. These new changes include issues ranging from postponing certain payments related to Installment Agreements and Offers in Compromise to collection and limiting certain enforcement actions.
Due to COVID-19, the IRS isn’t processing paper returns right now as they deal with distributing coronavirus stimulus checks.
They also extended the filing deadline for your 2019 taxes another 3 months from the usual filing deadline, making the official deadline to file your taxes July 15th, 2020.
IRS Tax Bill Due July 15: Avoid Penalties and Interest
Despite their immediate actions, the IRS will soon flip the enforcement switch back on, and come July 15th, a lot of people who made higher income in 2019 will likely owe back taxes.
At the time you file, you need to send in payment for any taxes due. Failure to pay your tax bill immediately often results in penalties and interest on the balance due after July 15th.
If you find yourself unable to pay in full, the IRS offers installment agreements to taxpayers who owe a balance to allow them to pay their tax burden over a period of time.
HOW INSTALLMENT AGREEMENTS WORK
The IRS divides their installment plans by taxpayers who owe more than $50,000 and less than $50,000.
IMPORTANT: We highly recommend readers to reach out to our firm first. Our clients never have to talk to the IRS, and a properly structured installment agreement made by us can save you money and time in the long run. You might also be eligible for other relief programs or get your penalties and interest forgiven. Reach out to our firm today for a consultation. [add your contact page link].
Balance Less Than $50,000
Taxpayers owing less than $50,000 may request an installment agreement via the IRS website, by mailing Form 9465-FS Installment Agreement Request or by phone at 1-800-829-1040. You need to provide your Social Security number, date of birth, caller ID from your recent IRS notice, PIN number or AGI, bank address, employer address and the proposed monthly payment amount.
Balance Greater Than $50,000
Taxpayers owing more than $50,000 may request an installment agreement by filling out form 433-F Collection Information Statement. Filling out the form requires information regarding your bank accounts, lines of credit, real estate, total number of dependents, assets, credit cards, wages, non-wage household income, monthly living expenses, down payment amount and proposed monthly payment.
IRS Installment Agreement Details
Installment agreements require a minimum monthly payment of $25. The IRS requests that you include your name, address, Social Security number, phone, tax year and return number on each payment issued. Installment lengths vary from 120 days to 60 months depending on your ability to repay.
IRS Installment Agreement Fees
Installment agreements that take more than 120 days require a setup fee. The IRS charges a setup fee for direct debit agreement or for a standard agreement. You may get a decreased fee if you meet their low income guidelines. The IRS charges a reinstatement fee if you don't pay your bill and your installment agreement goes into default.
Our firm specializes in tax resolution. We also serve clients virtually so don’t hesitate to reach out. If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem. [add your contact page link].
Why the IRS Cares About Your Cryptocurrency Holdings, and Why Now is the Time to Come Clean
After years of flying under the radar, taxpayers who hold Bitcoin, Ethereum, Litecoin and other cryptocurrencies are finally getting their fair share of scrutiny from the IRS. The tax agency, it seems, has figured out that cryptocurrency is here to stay, and that the mind-boggling returns early adopters have enjoyed could be a boon for government coffers.
The tax agency has also figured out that many holders of cryptocurrency, from the earliest of early adopters to latecomers enticed by ever rising prices and the fear of missing out, could owe a lot on these ethereal assets. The currency may be virtual, but to the IRS the taxes due are all too real.
Note; we encourage all readers facing an IRS tax problem tocontact us for a free, no-obligation, confidential consultation. If you think you might owe back taxes on your cryptocurrencies, contact us today.
The Illusion of Anonymity
If you have been skating along under the veil of anonymity and failing to report your cryptocurrency holdings, you might want to rethink your strategy. After years of taking a largely hands off approach, the IRS is catching up in a big way, and the tax agency is pulling out all the stops to recover the money the government is owed.
Many holders of cryptocurrency are under the erroneous impression that their transactions are totally anonymous, and that there is no way for the IRS, or anyone else, to tell how much they hold or how they use their virtual coins. That may be a soothing fiction, but the reality is far different.
The truth is the IRS has a wide range of options at its disposal, from official form filings to subpoenas and legal documents, to pierce the veil of anonymity and find the real world identities of cryptocurrency holders.
Did You Get a 1099-K? So Did the IRS
In some cases, holders of cryptocurrency are finding tax forms in their mailbox. If you receive such a form, you can be sure the IRS received a copy as well.
When you file your taxes, automatic matching programs will compare the amount you claimed with the amount on these automatically generated forms. If there is a mismatch, you will be hearing from the tax agency.
One of the most common forms used to report cryptocurrency holdings and transactions is the 1099-K. For sellers on eBay and some freelancers, this form will already be familiar, but it is being extended into the virtual world as well. If you receive a 1099-K form this year, it is time to come clean with your cryptocurrency holdings.
The Cryptocurrency Question and Your Tax Form
Until now, cryptocurrency holders could, and often did, plead ignorance. They could claim they did not realize their Bitcoin, Ethereum and other virtual holdings were taxable, and they could back up that assertion by saying the IRS never asked them about these assets.
The validity of that excuse may have been questionable, but with the 2020 tax year even that thin veil of supposed ignorance will be gone. Starting in 2020, taxpayers will be asked directly if they bought, sold, transacted or otherwise acquired any cryptocurrency, and they will be expected to answer that question in a truthful manner.
The wording of this question means anyone who holds any type of cryptocurrency would be required to answer in the affirmative. Even so, simply holding virtual coins in a cryptocurrency wallet does not necessarily mean any taxes will be due. Someone who simply holds cryptocurrency but makes no transactions should not owe any taxes, just as a holder of stock does not owe taxes until those shares are sold.
The IRS is getting serious about cryptocurrency, drawn by a combination of past returns, unreported taxes and increased exposure of these alternative forms of payment. For holders of Bitcoin, Ethereum and other forms of cryptocurrency, the days of flying under the radar are over. So make this the year you come clean, so you can enjoy your cryptocurrency without worrying about the IRS.
Our firm specializes in tax resolution and our experts can also help with cryptocurrency tax questions. If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.
Why Doing Your Own Business Taxes or Resolving Your Own Tax Problem is a Terrible Idea
Running your own business means wearing a lot of hats, from office cleaner and supplies buyer to client schmoozer and payroll maker. But should you add tax preparer to your already long list of duties? What if you have a tax problem with the IRS? What if doing your own taxes creates a tax problem?
We often see small business clients, clients with either a schedule C, or a corporation, partnership or LLC, with payroll and income tax problems, or an audit, simply because they thought they could do it on their own. It’s a bad idea.
If you are used to doing your own taxes when you were an employee or freelancer, you may think that preparing the tax return for your small business will be no big deal. After all, there are plenty of great tools on the market, from expense tracking apps for your smartphone to software like QuickBooks for your laptop. But before you start scanning those receipts and filling out those endless forms, you might want to reconsider.
Note; we encourage all readers facing an IRS tax problem to contact us for a free, no-obligation, confidential consultation. We can also help with unfiled tax returns for previous years, getting your business back into compliance.
Even if you think you can, doing your own business taxes is a terrible idea. Resolving your own tax problem is an even worse idea. Here are some of the reasons you should leave the filing of your business tax returns and resolving your business IRS tax problem to the professionals...
It is Easy to Make a Mistake
Even a small business tax return can span dozens of pages, and many returns are even more complex. With so many figures and so much information, you have literally thousands of opportunities to make a mistake.
Even a small mistake could have big consequences for your small business, and doing your own taxes puts you at risk. At the very least, those inadvertent blunders could mean paying more taxes than you should or cost you in penalties and interest; at worst those errors could trigger an audit and tie your business up for months. If you owe back taxes, the IRS can put a levy on your bank account and put a lien on your property until you pay up.
The Tax Laws Are Always Changing
Our tax laws have had some of the most dramatic changes last year than they had the previous 30 years. The tax code is already one of the most complex documents ever written, with more words than the Bible and complexities at every turn. To make matters even worse, those laws are not static; they are always changing.
Even if you are an expert on the current tax code, that expertise will not last long. Every new year brings a slew of new tax changes, and many of them will directly impact your small business. If you rely on your own expertise and your technological tools, you could miss a vital update that could save your firm money or help you avoid the ire of the IRS.
You Will Be on Your Own in Case of Audit
As an individual taxpayer, your chances of being audited are less than 1%, but as a business owner, filing a schedule C the odds are far higher. The IRS is increasingly setting its sights on the small business community, and that means you have a target on your back.
Even if you do everything perfectly, you have a good chance of being audited sooner or later. And if you prepare your own taxes, you could be on your own when the IRS comes calling.
Audit defense and IRS representation is a specialized skill set which 95% of CPA’s don’t have. We always recommend hiring an experienced and reputable tax resolution firm like ours who deals with the IRS for a living, day-in, day-out.
The Expertise You Gain When Hiring A Pro is Well Worth the Cost
Having your business taxes professionally prepared can be expensive. Depending on the size and complexity of the return, you could pay several hundred dollars to several thousand, to have the work done.
Even so, this is one expense you should be happy to incur. If you do your own business taxes and make a mistake, even a single blunder could cost you many times the fee you’ll pay to have it done right. So do yourself and your business a favor; leave the taxes to the experts.
Running a small business is hard enough. The last thing you want to do is add more tasks to your already busy plate or getting into tax tax trouble. If you are still doing your own business tax returns, it may be time to hand off this vital service to a professional.
Our firm specializes in tax resolution, even if you have years of unfiled tax returns, we can help! If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.
How to Stop an IRS Tax Levy
Of all the creditors or companies you might owe money to, the Internal Revenue Service can be the least forgiving about debt. If you don't pay your taxes, the IRS will levy and take possession of your property, including cash accounts, wages, and real and personal property. The IRS will sell non-liquid assets to raise funds to satisfy the debt you owe.
If you’ve received a levy notice from the IRS, it’s time to ACT IMMEDIATELY. Our firm may be able to get your levy released the same day but you must call now for a confidential consultation.
Forewarned Is Forearmed
Unless you don't open your mail or you moved without leaving a forwarding address, you probably won't be blindsided by an IRS levy. You'll receive a "Notice and Demand for Payment" of your tax debt well in advance of any action taken.
If you ignore this notice, the IRS will follow up by sending you a "Final Notice of Intent to Levy and Notice of Your Rights to a Hearing." Now the clock begins ticking.
You have 30 days to pay your tax debt or to contact the IRS to try to stop the levy. Even if you're unaware of the levy proceedings, your employer has a little bit of time to warn you if he receives notice that the IRS plans to take the bulk (up to 90%!) of your paychecks. Your employer doesn't have to begin sending your earnings to the IRS until the next pay period. With any luck, your employer will let you know what's going on within this time frame, so you can take action.
If the IRS levies your bank account, the bank will freeze the money in the account and remit it to the IRS after 21 days. Therefore, you must act quickly to try to have the funds released upon receiving a notice that the IRS has levied your bank account.
Contact A Tax Relief Firm
Now is not the time to do it alone. If you call the IRS, they will often trick you into giving incriminating answers, further distancing you for the tax relief you so desperately need.
They are not your friend. They are there to collect what they believe you owe in taxes. Contact a professional experienced in tax resolution to help you with your case. Would you go to court without a lawyer? Well, it’s the same with the IRS. You need professional representation from a CPA, Enrolled Agent or tax attorney who is also a tax resolution specialist.
Establish Hardship
If the IRS intends to levy your pay or Social Security benefits and you can't come close to making ends meet on what's left, the IRS wants you to contact them. The contact phone number should appear on the levy notice. DO NOT CALL THE IRS (see our note above).
The law requires that the IRS leave you with the total of your tax exemptions for the year plus your standard deduction divided by 52 if you're paid weekly.
Gather your documents and call our firm. We’ll help make the case to the IRS and explain that the levy will cause hardship for you and your family. You'll have to provide documented evidence of this, but if you do, the IRS will release the levy. This doesn't mean you no longer owe the tax. It just means that the IRS will leave your earnings and income alone and work with you to figure out some other way for you to satisfy the debt.
Make Payment Arrangements
We can also ask for payment terms for your tax debt even if the levy won't cripple you financially. If you enter into an installment agreement, the IRS will typically release the levy unless the notice you received specifically states otherwise.
You Can “Settle” For Less Than You Owe
An offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can't pay your full tax liability, or doing so creates a financial hardship. The IRS considers your unique set of facts and circumstances:
- Ability to pay;
- Income;
- Expenses; and
- Asset equity.
The IRS will generally approve an offer in compromise when the amount offered represents the most they can expect to collect within a reasonable period of time. It’s best to explore all other payment options before submitting an offer in compromise as the Offer in Compromise program is not for everyone. Make sure you hire a tax professional to help you file an offer, and be sure to check his or her qualifications.
The IRS really doesn't want to destroy you financially. It just wants the money it's owed. If you can make some arrangement to pay or prove that you don't owe the tax, or if you legitimately cannot pay it at this time, you may be able to make the levy go away.
Our firm specializes in tax resolution, even if you have years of unfiled tax returns, we can help! If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.