September 8, 2022 | Tax Compliance
The goal of IRS and state tax agencies is to get the tax money that is owed to them. Toward this end, they offer programs to make it easier for people who can’t afford to pay their taxes in a single lump sum to be able to pay what they owe. If this describes your situation, you may qualify for such a program that will allow you to pay your full tax debt off over time or to pay less than you owe in taxes.
Keep in mind, though, that even if you don’t have the money to pay your taxes, you must still file your tax returns to qualify for one of these programs. You must also file your return to avoid harsh monetary penalties for unfiled tax returns and the possibility of being investigated for tax fraud or evasion.
What If I Owe More Taxes Than I Can Pay?
There may be a solution for you if you owe more taxes that you can pay all at once. The following tax settlement programs are offered by the IRS to help taxpayers resolve tax debt:
- Installment payment agreements, which allow taxpayers to pay tax debt over time, in regular installments.
- Offer-in-compromise agreement, which is a settlement in which the IRS agrees to accept less than the full amount of taxes owed.
Read on to learn more about these tax debt relief options. You may wish to speak with an experienced tax attorney to learn whether you qualify and get assistance negotiating an affordable outcome with the IRS.
Installment Payment Agreement
In an installment payment agreement, you pay your taxes over time, typically in monthly payments. How much you pay in regular payments and for how long will depend upon your unique financial circumstances, including how much you owe in taxes and what your income and other expenses are each payment period. With an installment agreement, you will also have to pay interest and late-payment penalties unless you can negotiate with tax authorities to have these reduced or waived.
An offer-in-compromise is a negotiated agreement to pay less taxes than you owe. To potentially qualify for an offer-in-compromise, you must approach the IRS and make an offer of what you can pay, and you must include an initial payment with your offer. After the IRS reviews how much you owe in taxes and your financial circumstances, your offer will either be accepted or not. If accepted, you may have up to two years to pay the taxes you owe, depending on the terms of the agreement. If your offer is rejected, your initial payment will be applied toward the taxes you owe.
Another potential option for you if you can’t afford to pay taxes is to seek currently-not-collectible status. If you qualify, the IRS will stop collection activities against you. Note the word “currently,” however. Once your financial situation changes, if it does, the full amount of taxes you owe will become due, along with the penalties and interest that have continued to accrue. While you are in currently-not-collectible status, the IRS will periodically review your financial circumstances and may also file a tax lien against any property and assets you have.
An experienced back taxes lawyer can review your financial situation and counsel you about whether you may qualify for one of these programs. The New York State tax department offers similar programs.
What Happens If You Owe Taxes and Don’t Pay?
What happens if you owe taxes and don’t pay? Nothing good will happen, because tax authorities will eventually catch up with you. If you owe taxes and don’t pay and do not make any arrangements with the IRS or the NYS taxing authority to settle your tax debt, you could face a host of negative consequences, including wage garnishment, tax liens and levies, and potentially prosecution for tax evasion or tax fraud, depending upon all the circumstances. Even if you cannot afford to pay taxes all at once, you should always file your tax returns and try to negotiate a solution through one of the tax programs previously discussed.
Voluntary Disclosure Program for Unfiled Returns
If you have not filed your returns for a year or more and you owe taxes on those returns, you may potentially be able to avoid harsh financial actions and possible criminal charges through a voluntary disclosure program. Both the IRS and New York State offer these programs. These programs involve voluntarily coming clean to tax authorities before they start investigating you. To potentially qualify, you must:
- Tell the IRS or state that you have unfiled returns for X number of years and owe X amount of money.
- File your back tax returns.
- Pay what you owe in full or negotiate an agreement to pay over time.
- Agree to pay all future taxes.
Are You Unable to Pay Your Taxes? Reach Out to Experienced IRS and NYS Tax Attorney Timothy S. Hart for Help
If you can’t afford to pay some or all of the taxes you owe, do not ignore the problem and think it will go away. It will not. Sooner or later–and probably sooner rather than later—federal and/or state tax authorities will catch up with you. When they do, you could face severe financial penalties and other very unpleasant consequences. Instead of ignoring the tax debt problem, turn to Timothy S. Hart for help. He is a skilled tax attorney and Certified Public Accountant who has a successful history of negotiating payment solutions with the IRS and the New York State tax department for clients with tax debt.
To arrange a free consultation and get on the path to being tax-debt free, call our law office in NYC at (917) 382-5142 or in Albany at (518) 213-3445.
Even though our offices are in New York, Timothy S. Hart is licensed to address IRS tax issues in all 50 states, so he can help you with federal tax problems no matter where you live.