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Unpaid Taxes FAQs

Solutions and options for unpaid taxes

Unpaid Taxes FAQs
 

I Filed My Taxes But Don’t Have The Money To Pay, Can I Get An Extension To Pay?

Yes, you can request an extension to pay using Form 1127.  Form 1127, and its supporting documentation, should be filed as soon as you are aware of a tax liability or a tax deficiency you cannot pay without causing undue hardship.   If you are requesting an extension of time to pay the tax due on an upcoming return, Form 1127 must be received on or before the due date of that return, not including extensions.  

I Was Informed Of A Deficiency But Do Not Have The Money To Pay Right Now, Can A Get Short Extension?

If you believe the deficiency is correct, yes, Form 1127 may be used to request a SHORT TERM extension on a recently notify deficiency.  Note: Form 1127 must be received on or before the due date for payment indicated in the tax bill.

If I Need More Time To Pay What Are My Options?

 If you can't pay your taxes in full but can pay them over 6 years or less (7 with penalty and interest accrual), you may request an Installment Agreement .  If you are unable to pay in a 6 year period of time you may need be a candidate for an Offer In Compromise.

What Is I Am Completely Unable To Pay Right Now And In The Foreseeable Future, Is There Something I Can Do To Stop Collections?

If your current financial situation does not allow for ANY payment toward the debt, you may likely qualify for Currently Not Collectible Status (CNC).  You have to be able to convince the IRS you currently cannot make any payments.  This is a tricky situation and I would suggest you get some help.  In ordered to CNC status you must disclose all financial information to the IRS.  You want to know in advance if you will be successful.  If not, you have just disclosed all the financial information for the IRS to aggressively collect.

What Are The Penalties For Failure To Pay Taxes?

Penalties for unpaid taxes are one half of a percent of the taxes owed for each month the liability is outstanding. The maximum penalty is 25% of the outstanding balance. The penalty will increase to 1% if the tax remains unpaid 10 days or more after the IRS issues a Notice of Intent to Levy CP 504. The penalty will decrease to a quarter of a percent for any month in which an installment agreement is in effect.

What Is The Interest Charged On An Unpaid Tax Liability?

Interest on an unpaid tax liability is assesses at the federal short-term interest rate plus 3%. The rate is reevaluated every 3 months. This rate has been at 4% for some time now. There is no cap to the assessment of interest.

If I Can't Pay My Taxes Should I Still File The Tax Return?

YES!   The failure to file and the failure to pay are both separately assessed at one half of one percent per month, on any outstanding balance.  If you are subject to both the late filing and failure to pay penalties, the IRS can impose a combined penalty of 5% per month, which is less than the combined penalties. The combined penalty is based on the unpaid tax balance for each month your return is late. When you reach 25%, after 5 months, the failure to file penalty has capped. The failure-to-pay portion of the combined penalty continues at one half of one percent per month until it reaches a total of 22½%. Thus, the maximum combined penalty is 47½ %  Therefore to reduce the penalty accrual by half, file the return.   We have options, such as those below, to mitigate or eliminate the liability, but very little can be done if your are not in compliance (returns filed).   Potential options;

IRS Payment Plans and Installment Agreements

Offer In Compromise

Expiration of the Statute of Limitations on IRS Collections

IRS Bankruptcy Filing for the Discharge of Back Taxes and IRS Debts

Innocent Spouse Tax Relief

 

Will The IRS Eventually Aggressively Collect The Balance Owed?

Yes, eventually!  The progression will depend on a lot of factors (i.e. time, Automated Collections case vs. Revenue Officer case, tax compliance, etc).  It is in your best interest to be proactive.  Contact us to discuss your options.

Can I settle my unpaid taxes for less?

Yes it is possible settle unpaid taxes for less than the total amount owed. The two most common ways are on Offer In Compromise or a Partial Pay Installment Agreement. Both of the settlement methods require experience to analysis and prepare.  Give us an call to analysis your best option.  Choosing the wrong approach can be devastating, not to mention this may not be your best option.

Get Some Help

If you don’t know how to address the issue(s), have unfiled return/unpaid balances or just done feel confident, let the experts at Legacy Tax & Resolution Services represent you.  Work with our team of Certified Tax Resolution Specialists to resolve your issue(s) quickly.  Best of all, you don’t have to talk to the IRS or State; we can speak on your behalf.

 

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