With the latest reporting of new funding for the Internal Revenue Service, their attention will be focused on collecting ‘unpaid’ taxes. This amount of lost tax revenue (not due to tax loopholes) is estimated to be as high as $1 trillion each year.
Unlike many reports, they will not be auditing the W2 employees and ‘squeezing’ them of their hard-earned dollars. They will be busy for quite some time just trying to get tax revenue from those that have not paid.
Are you one of those who have not paid your taxes?
For many reasons, citizens do not pay their owed taxes. And most of them are not ‘illegal’ reasons. Business failures, health issues, etc. can cause individual taxpayers to lapse in paying taxes.
With the understaffing issues of the past few years, the taxpayers might not have felt that the pressure is on to pay those past taxes. But, those days may be coming to an end.
So how might you plan to pay those owed taxes?
IRS Payment Plans are designed to help people who owe money to the government pay back taxes in installments over a period of years.
The IRS offers three different types of payment plans: Installment Agreements, Offer In Compromise, and Streamlined Procedures. Each type has its own set of requirements and benefits.
An installment agreement allows you to make monthly payments toward paying off your tax debt instead of making one large payment at the end of the year. This option is usually offered as an alternative to bankruptcy.
There are a few restrictions for this payment option:
You can possibly avoid a tax lien if you set up this payment plan before the IRS files the tax lien.
If you owe more than $50,000 in federal income taxes, you might qualify for an offer-in-compromise (OIC). You can use an OIC (sometimes referred to as ‘A Fresh Start’ Program’ to settle your tax liability by offering to pay less than what you owe. We discuss this option in more detail here.
If you owe more than $50k but less than $100k, there have been 84 month tax payment plans that allowed you more time to pay the taxes owed. And it allowed the taxpayer from having to provide as much tax disclosure documentation.
The NSIA, launched in March 2020, is much like a SLIA, because it allows taxpayers who owe up to $250,000 to get into a payment agreement without financial disclosure, if they can pay their full tax bill before the collection statute of limitations expires. The new plan allows more favorable payment terms and avoids the additional paperwork between the IRS and taxpayers.
The NSIA extends the time to pay and the amount taxpayers can owe, while avoiding detailed financial disclosure. The NSIA comes with one disadvantage: a tax lien will probably be filed by the IRS.
If you owe a large sum and don’t yet have an agreed payment plan with the IRS, the IRS might assign a revenue officer to handle your case.
In such cases, you will have no other option but to set up a payment agreement based on your ability to pay. The revenue officer will look at how you can pay your tax bill in the quickest way possible—which may include liquidating some of your assets, much like a bankruptcy court.
But, now the individual taxpayer who owes up to $250,000 might find it a bit easier to negotiate a payment plan with the IRS. And if your financial circumstances change in the future, you have the option to renegotiate the terms of the payment agreement.