Worried about being unable to pay taxes in full after filling in your return? Never resort to the option of not filing your return at all. Whatever the problem file your return and inform the IRS about your inability to pay your taxes as lump sum. There is an option as far as Federal taxes are concerned you can request the IRS to accept the back taxes as EMI, or equated monthly installments. In the case of state taxes, you will have to determine whether the state allows this option. Or, you will have to make arrangements to pay state taxes in full.
Here is what you can do: Complete the tax return and sign it. Get a Form 9465, Installment Agreement Request if you owe taxes up to USD 25,000 or less. And, if you owe more than USD 25,000 in taxes you need Form 433F. See: http://www.irs.gov/businesses/small/article/0,,id=108347,00.html . There is also an option to complete the agreement online if you owe USD 25,000 or less as taxes. Complete the requisite form accurately. Be sure to enter details like the form number used, the assessment year or tax year, and the amount of tax owed. Write a check for the amount you can afford to pay and establish that you do intend to pay the taxes. Calculate the maxium amount you can pay each month. Include penalties, interest, and any other charges the IRS may levy. Try and pay back in the shortest possible time and within one year. Commit to the exact day in which the money will reach the IRS each month. There is the option of instructing your bank to pay the amount to the IRS every month automatically. Make sure the form is signed and dated . In case it is a joint filing both spouses must sign the agreement. Attach the form on top of the income tax return. Send in or submit the form online.
It is important never to miss a payment. Send in the money even if you do not receive a statement from the IRS. If you delay or miss a payment, the agreement will be immediately terminated by the IRS.
If you are in deep trouble and there is no way you can pay the taxes even in installments you must consider an “offer in compromise”. To do this you will need the help of a tax attorney or CPA. The tax professional must be experienced in handling tax debt matters. He or she must be able to negotiate the most feasible terms with the IRS. It is important that the person you consult has in depth knowledge of the laws governing the IRS, laws concerning tax debt, laws specific to the place you reside in, and how the IRS evaluates installment payment requests.
This option for tax payers is quite recent and came into practice only in January, 2005.About Author:
Barry Allen is a freelance writer for Online Tax
Firm, the premier website to find tax, return tax, tax software, free tax filing, sales tax, services tax,income tax, property tax and many more.