It seems that Americans are paying more and more taxes on more and more stuff each year. Everything from a deck of cards (which has a ten cent tax in the state of Alabama, by the way) to soda (if ever in Chicago, keep in mind that soda in a bottle is taxed at merely three percent, while fountain soda is taxed at nine).
To add insult to injury, each April, most of us groan with disdain for the annual filing of our income taxes. Not only can tax forms be overwhelmingly complicated (the 1040EZ, which is supposed to be simple yet has more than 33 pages of instructions!), but they also include the standard deductions, qualified deductions, tax rate charts; it is enough to make you want to throw your hands up in the air and cry.
So what do you do if you are targeted for an audit? And what if you find yourself owing the IRS back taxes? What happens when you owe the IRS money?
The first thing to ask yourself about what happens when you owe the IRS money is, why do I owe money to the IRS? What is the nature of the delinquency? Did you file your taxes late or not at all? Or did you accidentally deduct for something you should not have? As such, what happens when you owe the IRS money?
After contacting the IRS about back taxes and before your situation escalates to requiring a tax levy (which is one of the worst possible outcomes for those seriously indebted to the IRS), here are a few options of what happens when you owe the IRS money.
There are methods on how to negotiate with the IRS. There are also options to consider, for example, of what happens when you owe the IRS money and you can not pay it back right away.
An offer in compromise means that the delinquent taxpayer (you) offers the IRS as much of your debt as you can in a very short time frame. In response, the IRS will write off any of your outstanding debts. This option is lengthy and difficult.
What happens when you owe the IRS money and you can pay it back over time? An installment agreement is when you pay back the IRS via monthly payments. The following are the different types of installment agreements.
What happens when you owe the IRS money less than $25 thousand? In this instance, a streamline installment agreement is created if you can payback the entire amount in less than five years.
A conditional expense installment agreement means that you have other required monthly expenditures (loans, credit cards), but you can still payback the IRS within five years.
What happens when you owe the IRS money that can be repaid over time? A stair step installment agreement involves paying one set amount the first year, and then a larger monthly payment for the next four years so that the entire amount is repaid in five years.
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