IRS Payment Options
Whether you agree with the IRS’s determination of the amount of taxes you owe or you decide to Appeal their decision, you will need to establish a way to make payments to the IRS. The most efficient and secure method is the electronic payment option. Making payments electronically assures timeliness and tracking ability.
However, if you decide to pay by mail, be sure to return the tear-off stub on your bill and use the IRS’s return envelope, if provided. In order to make sure your payment credits properly to your account, please:
- Make your check or money order payable to the United States Treasury
- Enter the primary social security number or employer identification number
- Enter the tax year and form number
- Ensure your name, address, and telephone number are on the payment
- Don’t send cash
- Allow plenty of time for delivery
If you’re not able to pay your balance of the taxes due in full immediately, the IRS may accept an installment agreement.
Direct Debit Installment Agreements offer a lower user fee than other installment agreements and help you to avoid defaulting on your agreement by allowing timely payments automatically. Just keep in mind that just because you have entered into an installment agreement with the IRS, the interest and late payment penalties will continue to accrue while you make your installment payments until the balance of the taxes is paid in full.
If you can’t full in pay under an installment agreement, you may propose an offer in compromise (OIC). An OIC is an agreement between you (the taxpayer) and the IRS that resolves a taxpayer’s tax liability by payment of an agreed upon reduced amount. The ultimate goal is a compromise that suits the best interest of both the taxpayer and the IRS. To be considered, generally you must make an appropriate offer based on what the IRS considers your true ability to pay. Submitting an application does not ensure that the IRS will accept your offer. It begins a process of evaluation and verification by the IRS, taking into consideration any special circumstances that might affect your ability to pay.
Before an offer in compromise can be considered, all tax return filings and payment requirements must be current. Taxpayers in an open bankruptcy proceeding are not eligible.
When you submit your application, you will need to provide an appropriate offer based on your assets, income, expenses, and future earning potential. The application requires you to describe your financial situation in detail. The Law Office of Robert Thomas specializes in the application process and we will complete the forms thoroughly and accurately and submit them for you.
Are You Eligible for an Offer In Compromise?
Before your offer can be considered, you must:
- File all tax returns you are legally required to file,
- Have received a bill for at least one income tax debt included on your offer,
- Make all required estimated tax payments for the current year, and
- Make all required tax deposits for the current quarter if you are a business owner with employees. Your offer will be immediately returned without consideration if you have not filed all tax returns you are legally required to file.
Acceptance by the IRS of your Offer in Compromise
The IRS may accept an Offer in Compromise based on three grounds:
- First, the IRS can accept a compromise if there’s doubt as to liability. A compromise meets this only when there’s a genuine dispute as to the existence or amount of the correct tax debt under the law.
- Second, the IRS can accept a compromise if there’s doubt that the amount owed is fully collectible. Doubt as to collectibility exists in any case where the taxpayer’s assets and income are less than the full amount of the tax liability.
- Third, the IRS can accept a compromise based on effective tax administration. An offer may be accepted based on effective tax administration when there’s no doubt that the tax is legally owed and that the full amount owed can be collected, but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances.
While your offer is being evaluated:
- Your non-refundable payments and fees will be applied to the tax liability (you may designate payments to a specific tax year and tax debt);
- A Notice of Federal Tax lien may be filed;
- Other collection activities are suspended;
- The legal assessment and collection period is extended;
- Make all required payments associated with your offer;
- You are not required to make payments on an existing installment agreement; and
- Your offer is automatically accepted if the IRS does not make a determination within two years of the IRS receipt date.
If your offer is accepted
- You must meet all the Offer Terms listed in Section 8 of Form 656, including filing all required tax returns and making all payments. Robert Thomas will discuss each term with you to ensure eligibility;
- Any refunds due within the calendar year in which your offer is accepted will be applied to your tax debt;
- Federal tax liens are not released until your offer terms are satisfied; and
If your offer is rejected
- You have 30 days to appeal a rejection. The Appeal must meet additional guidelines and the Appeal must be submitted on Form 13711, Request for Appeal of Offer in Compromise.
If you or your business is currently in an open bankruptcy proceeding, you are not eligible to apply for an offer. Any resolution of your outstanding tax debts generally must take place within the context of your bankruptcy proceeding.
What if you can Pay your Tax Debt in Full?
Generally, the IRS will not accept an Offer in Compromise if you can pay your tax debt in full or through an installment agreement and/or equity in assets.
Doubt as to Liability
If you have a legitimate doubt that you owe part or all of the tax debt, call Robert Thomas. We specialized in completing and submitting the appropriate information in accordance with Form 656-L, Offer in Compromise (Doubt as to Liability).
Your Future Tax Refunds
The IRS will keep any refund, including interest, for tax periods extending through the calendar year that the IRS accepts the offer. For example, if your offer is accepted in 2016 and you file your 2016 Form 1040 on April 15, 2017 showing a refund, IRS will apply your refund to your tax debt. The refund is not considered as a payment toward your offer.