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IRS TAX TIP 2001-34
WHAT TO DO IF YOU
CAN'T PAY YOUR TAXES
WASHINGTON -- If this year's tax filing
deadline will be a "pay" day for you and you cannot pay
the full amount that you owe, you should still file your return by
the due date and pay as much as you can. The IRS may allow
you to pay any remaining balance over time in monthly installments
through an Installment Agreement or possibly even settle for less
than the full amount owed through its Offer in Compromise program.
If you find that you cannot pay the full amount
by the filing deadline, you should file your return and pay as
much as you can by the due date. To see if you qualify for an
installment payment plan, attach a Form 9465, "Installment
Agreement Request," to the front of your tax return.
The IRS has streamlined the approval process if the amount owed is
not more than $25,000 and can be paid off within a five-year
period. Be sure to show the amount of your proposed monthly
payment and the date you wish to make your payment each month.
The IRS charges a $43 fee for setting up an
installment agreement and you will also be required to pay
interest plus a late payment penalty on the unpaid balance.
This penalty, usually 0.5 percent of the balance due per month,
drops to a 0.25 percent rate when the IRS approves the installment
agreement if your return was filed on time and you did not receive
a levy notice from the IRS.
Besides possibly qualifying for the reduced
late payment penalty, you have another reason for filing your
return by the due date - you avoid the late filing penalty, 5
percent per month of the balance due. Paying as much as you
can when you file your return will reduce interest and penalty
charges.
If you find that you cannot possibly come up
with the money to pay your taxes, even through an installment
plan, you may apply for an "offer in compromise" to
settle your tax debt for less than the full amount owed. The
IRS will review your financial situation and future income
potential to determine whether your offer is appropriate. Send
Form 656, "Offer in Compromise," and Form 433A,
"Collection Information Statement," to the IRS to
determine your eligibility.
The IRS Web site at www.irs.gov
has interactive sections to help you determine your eligibility
for an installment plan (www.irs.gov/prod/ind_info/coll_stds/collect.html)
or an offer in compromise (www.irs.gov/prod/ind_info/oic/index.html).
You can also download all the necessary forms from that site.
The forms are also available by calling (toll free) 1-800-TAX-FORM
(1-800-829-3676).
** Reference: IRS
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