Tax Planning Options for Taxpayers Who Can’t Pay Their Tax Liability Read the Article Open Share Drawer Share this:Click to share on Facebook (Opens in new window)Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Pinterest (Opens in new window)Click to print (Opens in new window) Written by Published Oct 22, 2013 - [Updated Jan 3, 2014] 2 min read Can’t pay your outstanding tax bill? First, be sure you still file your tax return. Your ability to pay is a separate issue from the filing of the tax return and the IRS has extra costs you’ll incur for failure to file. The failure to file penalty can be as high as 25% of the tax you owe, so it’s important that you get your tax return filed and not let your liability snowball. If you filed and owe the IRS, you should know about the IRS Fresh Start Program. Here are three of its features that offer a bit of relief for those struggling to pay their back taxes. Tax Liens A tax lien has a negative effect on your credit score, and even after it’s removed, will appear on your credit report for 7 years. This can have a nasty consequence when you are looking to buy a new home, refinance an existing mortgage or take advantage of a new credit card offer. Although notices of Federal Tax Liens may still be filed on amounts less than $10,000, with Fresh Start, the amount you can owe before the IRS will file a tax lien has been increased from $5,000 to $10,000. If you already have a tax lien, you may be able to have the lien withdrawn by entering a direct debit installment agreement. Installment Agreement This option has been updated to make things a bit easier. You can request an installment plan by filing a Form 9465 with the IRS. You may use this form to request your payment plan for up to $50,000 owed, and may request the payments be spread out up to 72 months. You will still be paying both interest as well as a penalty, so you may wish to choose the fastest payoff time you can afford. Depending on your circumstances the IRS has discretion to reduce or waive penalties, so it’s in your best interest to have a dialog if you feel your circumstance might apply. Offer in Compromise The IRS will negotiate a settlement of your taxes owed if the offer is as much as they can reasonably expect to collect over the 6 years. They offer an on line tool, The Offer In Compromise Pre-Qualifier which asks you for details including amount owed, your assets, and current income. Last, the IRS waived late filing penalties for those impacted by the explosion at the Boston Marathon or by the storms in the South and Midwest. The IRS did not waive interest due for both situations, only the penalties for late filing. As this year draws to a close, it can’t hurt to start your planning now for your 2013 tax filing. A few manila folders is all you need to stay organized so when you sit down to file your taxes with TurboTax early next year, you’ll see how fast it is to file this year’s taxes and not worry about interest or penalties. Previous Post Gen X vs. Millennials: Financial Habits Compared [Infographic] Next Post Start Tax Planning Early: 8 Great Year-End Tax Tips Written by More from Leave a ReplyCancel reply Browse Related Articles Crypto Understanding Crypto and Capital Gains Work 7 Things You Need to Know About the New Business Report… Work Using Form 8829 to Write-Off Business Use of Your Home Tax Tips Roth 403(b) vs. Roth IRA: Which Should You Invest In? Life Interest Rates, Inflation, and Your Taxes Investments Essential Tax Tips for Maximizing Investment Gains Uncategorized TurboTax is Partnering with Saweetie to Elevate Hoop Dr… Business Small Business Owners: Optimize Your Taxes with a Mid-Y… Small Business The Benefits of Employing Your Children and the Tax Bre… Income and Investments Are Olympics Winnings Taxed?