The Federal government has given the Internal Revenue Service (IRS) the legal right to collect federal tax debt. Arkansas taxpayers who fail to pay their federal taxes are with holding money from the government to fund government programs and activities. The Internal Revenue Service has the authority to use a variety of very aggressive collection tactics to help the federal government recoup tax liability such as wage garnishments, tax levies, tax liens, repossession of your property, fines or put you in jail.
Do not let the Internal Revenue Service bully you. If you live in Arkansas and the IRS is disrupting your life, contact a tax professional such as an enrolled tax agent, tax accountant or tax attorney to discuss available tax settlement options.
Internal Revenue Tax Settlement Options
If you have unpaid taxes, the Internal Revenue Service may allow you, in certain circumstances, to settle your tax debt for less than you owe. The Internal Revenue Service will agree to a tax settlement when it is in the best interest of the government. There are a variety of tax settlement options which may be available to you such as Offer In Compromise, Installment Plan, Penalty Abatement, or Currently Not Collectible.
Offer in Compromise
Offer in Compromise or OIC is one method Arkansas taxpayers may settle IRS tax liability. Taxpayers must meet a specific set of criteria to qualify for Offer in Compromise. The Internal Revenue Service may be willing to accept less than the full amount owed hoping that you will be able to fulfill your future tax obligations. The Internal Revenue Service only accepts approximately 20% of the OIC offers. If you are considering Offer in Compromise, it may be beneficial to discuss your OIC offer with a tax professional.
Offer in Compromise may be considered if one of the following can be proven:
- Doubt as to Liability – The Internal Revenue Service may agree to an Offer in Compromise if there is a doubt to the amount of tax debt owed.
- Doubt as to Collectibility – The Internal Revenue Service may accept an Offer in Compromise if they believe it is unlikely the debt will ever be collected. Under this condition, there is not a doubt as to the amount of federal tax liability.
- Effective Tax Administration – Certain individuals may have hardships which will not allow them to pay their federal tax bills with out “economic hardship which is unfair and inequitable”. The handicapped and elderly are the most common individuals who use this condition to qualify for Offer in Compromise.
Individuals must complete the following tasks in addition to meeting the criteria above:
- Individuals must pay their federal taxes on time for the next 5 years
- All requirements outlined in the Offer in Compromise plan must be followed
- Federal tax returns must be filed before or by the tax extension deadline
- The Internal Revenue Service will apply all of the future tax refunds to your tax liability
Installment Agreements for Arkansas Taxpayers
The installment agreement is the most common payment method used to pay IRS back taxes to the Internal Revenue Service. If the amount owed is less than $25,000, the IRS generally will agree to the installment plan. If you owe more than $25,000, it may be a good idea to review your options with a tax professional to discuss other tax settlement options. Penalties will continue to accrue during the installment period. It will always be less expensive to pay all federal tax debt in total if possible.
Partial Payment Installment
The Internal Revenue Service has developed the Partial Payment Installment Agreement (PPIA) as another repayment plan option to pay federal tax debt. The PPIA allows the taxpayer to make partial monthly payments and potentially settle the tax debt for less than the full amount of tax debt owed. Arkansas residents who are considering a PPIA must submit complete financial information and the proper forms. The Internal Revenue Service will review the PPIA plan every 2 years. The terms of the PPIA may be increased if your financial situation improves. Many taxpayers find this method of resolving tax debt easier than Offer in Compromise.
Currently Not Collectible
Certain Arkansas taxpayers will have financial difficulties which will make it impossible to pay federal tax debt. In these circumstances the Internal Revenue Service may decide the tax debt is “currently not collectible” due to the severe economic hardship debt collection would cause for the Arkansas taxpayer. Currently not Collectible will stop IRS debt collection efforts, but the back taxes will remain and interest and penalties will continue to accrue.
Penalties may be assessed by the Internal Revenue Service for failing to pay federal taxes, providing inaccurate financial information on tax forms, or requesting a fraudulent refund. If you have been assessed penalties you can not pay, under certain circumstances the Internal Revenue Service may be willing to remove those penalties. Tax professionals can help Arkansas taxpayers complete the appropriate forms and provide the correct information to the Internal Revenue Service.
Should I use a Tax Settlement Option?
The Internal Revenue Service is aggressive and they can make your life difficult. It is not a good idea to avoid their phone calls or fail to open mail. Unlike other debt collectors the IRS can:
- Freeze the money in your bank accounts
- Seize your business and personal assets
- Seize your equipment
- Seize your personal property
- Garnish your wages
Talk to a tax professional today to discuss your options for settling back tax issues and getting your life back.