Paying taxes is a complicated thing. There are a lot of forms, the process to follow. All of those things, if you get behind payments, then they become even more complicated. So what if you are stuck in back taxes. What you should do. There are some things you can check out, which we will tell you about it. They will help you to get tax relief. Maybe you would get some Tax refund as well. Now to those options.
IRS Provide Tax Relief and Payment Plans
So, when you are failing in paying taxes, the best thing is to get more time. IRS has two plans for it. They are called Short Term payment plan and Long term payment plan. We will discuss both of them one by one.
In short term payment plans, you get 120 days or less than it to pay the taxes. You do not have to pay anything for applying to this installment plan. You can apply online, or call on their number to do it. Also, you can pay either by debit or credit card. There is an option for automatic withdrawals from your account, as well. However, the maximum amount you can own is $100,000. They have to be composed of Interests, penalties, and taxes. Getting a tax refund would be quite tricky on it. Read about tax brackets for year 2019-2020.
What about long term payment option?
Now, we will see the long term payment option, which is for 120 days or more than it. So, the maximum amount for which you can apply for a long term is $50,000. Again it has been combined with the taxes, interest, and penalties. Now, when you want to use it, there is a fee for it. If you use online, the cost would be $31. When applied via phone, the price will be $107. For low-income applicants, the fee will be waived. In a way, you could say a tax refund. Now it is for automatic withdrawals.
If you decided to pay manually, then to online apply, you will have to pay $149 — $ 225 for those who will apply in person, mail, or via phone. For low-income applicants, the fee may reduce to $43. In some cases, it is entirely reimbursed. Use Tax Calculator to check for tax refund eligibility.
If you pay via credit or debit card, you will pay a processing fee. On the credit card, it is around 2%. For a debit card, it is about $2-$4. Read more about Tax Relief.
Offers in Compromise
Now, let’s say for due to some reason or financial constraints, you are unable to pay taxes. For tax relief, IRS has something which is called “Offer in Compromise.” In simple words, you pay less than what you owed to the IRS. But It is not as easy as you think. It only happens you are having a huge tax debt or for some other reason. However, it is harder than you might think to get an offer in compromise. IRS accepts very few applications for it. You must see other options before turning to it. When you apply for it, IRS sees your financial ability, Your expenses, income, and assets. There is a free offer in compromise tool to determine where you will get qualified or not. The form you will need for it is 656-B. Need more info about essential things about taxes in USA.
So, these are the two ways for tax relief. There are two more ways of doing it, which we will talk about in the post. For a Tax Refund, you will have to see our post for it. However, we will write about it in the next part.