Improving And Moving Past Tax Debt
Becoming entrapped in tax debt is not just something that happens to those who are in poverty or trying to meet their needs
. This problem has the propensity to happen to anyone in any circumstance.
There are a number of people who, by the time taxes roll around, are unable to make their necessary payments and pay the dues that they owe the government, as well. Sometimes it is due to their poor planning, but very often happens when they are simply just struggling to make it.
Often, those that become involved in this situation feel extremely hopeless; however, there are things that can be done to assist them to lessen or adjust the debt that they owe to the government. One measure that has been taken by the IRS, or Internal Revenue Service, is instilling a program called an Offer in Compromise.
Filing an Offer in Compromise, or OIC, means that you are agreeing to pay less than the full indicated amount of your tax debt and be subjected to the consequences, thereof. The government organization will often let this occur because there is little doubt that the individual or family will ever be able to pay the full amount.
It may also occur if they are unsure whether or not the person is liable for the amount that they have been charged. To apply for this program, you must fill out a series of forms and send them into the IRS.
These forms include a 656, 433-A, and a 433-A Worksheet; these items are usually available directly from the agency or also from a tax relief agent or lawyer. This may seem like a "Get out of Jail Free Card," but there are definitely consequences laid forth by the organization that anyone who receives an OIC must follow and agree to.
First off, the individual must agree to pay the amount that has been decided or agreed upon in the Offer in Compromise paperwork or invoice. They must also promise to file their tax return on time and pay their debts to the government on time for the next five years without any exceptions.
With this settlement, the individual also allows the agency to keep any payments, refunds, or credits that were applied to the debts before you decided to file for the OIC. This can be difficult, as these amounts are extra money in your pocket; make sure that you fully understand this consequence.
Refunds that would have been paid to you the year that it was filed must also be forfeited to the Internal Revenue Service with no exceptions. If any of these standards are not met by the party that has requested the leniency, then it is most likely the program will be revoked and the full tax payment will be reinstated to the individual.
It is extremely important for you to follow these procedures exactly in order to prevent the Internal Revenue Service from revoking the Offer in Compromise. You can do this by filing on time each year for the next five years or requesting an extension before April fifteenth.
Those that are granted an extension should file no later than this date, or they may very easily suffer. You must also make sure to pay on time or before the designated date.
Many expect that going through this process will drastically reduce the amount that they owe and that they basically get a break. Though it is definitely a help compared to having to hand over the entire amount, you will still be indebted the reasonable collection potential.
This amount is designated by the organization, and is basically the number that they guess you would be able to collect within twenty-four months to get rid of the debts that you owe. In other words, you do not get to designate this amount yourself and it could be higher than what you were expecting, though it will be less than the original owed number.
Applying for this program is smart if you are not able to pay, but there are a limited amount of these leniencies that are granted each year. The amount equals around sixteen percent.
Making intelligent and frugal decisions can possibly prevent you from having to deal with these types of situations in the future. The more you pay attention to your finances and the less debt you incur, the easier of a time you should have when tax season rolls around.
by: Jack Landry
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