1. If you have a sizable estate, this is a good time to give some of it away while you’re still alive. The current estate and gift tax exemptions and rates are the most generous in many decades, says tax historian Joseph Thorndike. As recently as 2010, though no estate tax applied for that year, the gift tax exemption limited you to handing off $1 million free and clear. (If that sounds like more than you can imagine passing along, keep in mind that many people would hit it quickly, counting the value of their real estate.) But at least for 2011 and 2012, each person can give away $5 million without paying a penny in taxes–which makes now an advantageous time to set up a trust for your grandchildren, say, or to hand over part of a closely held business. “We don’t know what the law will be like in 2013,” says Mark Nash, a Dallas-based partner in the personal financial services practice of Price-waterhouseCoopers. “But it’s unlikely it will be this generous.”

2. People making money from a hobby may benefit by starting to run it as a business before the end of this year. As of last January, anyone who sells something is subject to a new kind of reporting by the companies handling the transactions. If you have more than 200 transactions totaling over $20,000 per year on eBay or on MasterCard or Visa from peddling your wares at craft fairs, say, you (and the IRS) will get a 1099-K showing your take. Handling it as a business rather than a hobby will allow you more generous deductions, says Eva Rosenberg, a tax expert who answers questions and offers professional education . For example, expense deductions from a hobby are limited to the amount of income it brings in and reduced by 2 percent of your adjusted gross income, no matter how much you actually spent. One easy way to establish that you’re truly in it for money: Write up a business plan.

3. Take some deductions early. There’s a lot of talk about capping the generosity of itemized deductions as a way to raise more revenue. Those in a high tax bracket may want to prepay real estate taxes and state income taxes so as to nab the greatest benefit while it’s still available. This strategy also applies to other expenses you can accelerate: the points you pay upfront to refinance a mortgage or buy a house, for example, and unreimbursed professional dues.

4. Take advantage of the zero percent capital gains tax available through 2012 to low-bracket taxpayers; for this year, that means single taxpayers with taxable income of no more than $34,500 and joint filers with up to $69,000. Retirees who come in under these income limits may want to bump up against the ceiling by realizing some of their investment gains in 2012 rather than in 2013, says Kay Bell, who writes the popular “Don’t Mess With Taxes” blog. For people in higher brackets whose stocks have appreciated significantly and who are interested in giving money to adult children or elderly parents, Rosenberg suggests thinking about giving them shares if they’re in the right income range. They just can’t be your dependents; if the capital gains were realized by a dependent college student, for example, they’d be taxed at your rate. “This is something that costs you little and could cost them nothing,” she says.

5. Anyone who has sold a business, a building, or some other asset by setting up an installment agreement with the buyer might benefit by urging him or her to refinance and pay up completely as soon as possible. “I’m sure this 15 percent capital gains tax will end in 2012. You don’t need a crystal ball to see that,” says Rosenberg, who expects a dramatic increase by 2013.

The move shouldn’t be a tough sell to make to your buyer, she says, because interest rates worldwide are low and will almost certainly go up. If you need to sweeten the deal, she suggests offering to pay some of the refinancing fees. “It will reduce your profit, but you’re still going to save a lot of money in the long run.”

Source: US News

Direct Tax Relief (“DTR”) is a tax resolution company that assists individuals and small businesses with their IRS tax problems as well as State tax problems. Our firm of experienced Tax Attorneys, certified tax preparers, tax resolution specialists and tax consultants specialize in providing IRS tax relief across the country in all 50 states. Once our firm is retained for services and we file the Power of Attorney, our Tax Attorneys immediately take over all communication with the IRS. You don’t have to fear being bullied or harassed by the IRS while DTR is representing you.

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In Massachusetts, Democratic U.S. Senate challenger Elizabeth Warren put herself in an awkward position when she revealed last week that she did not pay the higher of two state income tax rates. Massachusetts allows residents to voluntarily pay 5.85 percent or the state’s standard 5.3 percent rate.Warren has been a supporter of the Buffett Rule, which calls for a minimum tax for high-income earners, named for billionaire investor Warren Buffett who backs the rule being promoted by President Barack Obama.

Massachusetts Republican Senator Scott Brown quickly hammered Warren as hypocritical for backing the Buffett Rule while turning down an opportunity to pay more taxes herself. Brown on Tuesday said he’s releasing six years worth of tax returns. Warren said she will release four years.

Connecticut candidates vying for retiring independent Senator Joe Lieberman’s seat have split on whether to release their tax returns. Democratic Representative Chris Murphy and former Republican Representative Chris Shays are releasing their returns. Republican Linda McMahon, who was CEO of World Wrestling Entertainment and a Senate candidate in 2010, is not releasing a tax return. The Greenwich Times reported in March that McMahon and her husband Vince have an investment portfolio of between $92 million and $355 million.

Republican primary voters in Indiana have gotten conflicting messages about personal tax returns. Indiana Republican Senator Richard Lugar bought commercials pointing out an error on his challenger’s tax return. Lugar is facing a tough primary challenge from state Treasurer Richard Mourdock, who was attacked in the ad over claiming a homestead tax deduction. But the claim turned out to be a mistake by county tax collectors. Mourdock was quick to counter attack with an ad painting Lugar as desperate.

Source: Reuters

Direct Tax Relief (“DTR”) is a tax resolution company that assists individuals and small businesses with their IRS tax problems as well as State tax problems. Our firm of experienced Tax Attorneys, certified tax preparers, tax resolution specialists and tax consultants specialize in providing IRS tax relief across the country in all 50 states. Once our firm is retained for services and we file the Power of Attorney, our Tax Attorneys immediately take over all communication with the IRS. You don’t have to fear being bullied or harassed by the IRS while DTR is representing you.

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Figures released Friday by the State Budget Agency show tax revenues for last month came in about $159 million, or 9 percent, ahead of projections and about 25 percent more than what the state collected in April 2011.The state had fallen behind its revenue projections with weak collections in January and February, but it is now slightly ahead 10 months into the budget year.

State budget director Adam Horst attributes some of the April revenue growth to faster processing of income tax returns and that May’s revenue could decline because of fewer payments being processed.

Source: Associated Press

Direct Tax Relief (“DTR”) is a tax resolution company that assists individuals and small businesses with their IRS tax problems as well as State tax problems. Our firm of experienced Tax Attorneys, certified tax preparers, tax resolution specialists and tax consultants specialize in providing IRS tax relief across the country in all 50 states. Once our firm is retained for services and we file the Power of Attorney, our Tax Attorneys immediately take over all communication with the IRS. You don’t have to fear being bullied or harassed by the IRS while DTR is representing you.

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Shift to Growth
Capital gains rates are also set to rise at the start of 2013, but the rise will be more modest. Currently, the rate is set to rise from 15% to 20%, if nothing is done in D.C. A 33.3% rise is certainly significant, but it’s less severe than a dividend income tax rate rising from 15% to ordinary income tax rates, especially for high-income earners.

From this standpoint, an investor could look to invest in companies with above-average earnings growth potential. Stock returns follow profit growth over the long haul and, if done correctly, would let the investor sell off the appreciated stock and use it to replace lost dividend income. It offers a better appeal from a tax perspective, and could end up increasing overall wealth. Another important point is that capital gains taxes are for stocks bought and hold indefinitely. This is because capital gains must be paid on realized gains, and not those that are unrealized over many years and allowed to build without paying a cent in taxes.

Return to Income
If dividends start to be taxed at ordinary income rates again, then from a tax perspective they will be identical for income generated from many types of bonds. For corporate bonds, the tax treatment will be the same. In this respect, corporate bonds will now be equal to dividends in terms of taxes and can be looked at more closely. The current yield on a 10-year corporate bond of the highest quality exceeds 4%, which is on par to the dividend yield of the highest yielding blue chip stocks. Clearly, the risk of rising interest rates and inflation also need to be considered for bonds, but from an income perspective it would be on par with stock dividends.

Other types of bonds will now be more appealing than dividends as they offer certain tax benefits. U.S. government bonds are generally only taxed at the federal level, as are certain agency securities, such as those from the Government National Mortgage Association (GNMA, or Ginnie Mae for short). Municipal bonds are even more appealing and can help an investor avoid federal, state and local taxes, provided he or she resides in the state or municipality of where the bond was issued. The 10-year municipal bond rate of the highest rated class is currently only 1.58%, but will be higher because the tax equivalent yield adds back what would have been paid out in taxes.

Source: Investopedia

Direct Tax Relief (“DTR”) is a tax resolution company that assists individuals and small businesses with their IRS tax problems as well as State tax problems. Our firm of experienced Tax Attorneys, certified tax preparers, tax resolution specialists and tax consultants specialize in providing IRS tax relief across the country in all 50 states. Once our firm is retained for services and we file the Power of Attorney, our Tax Attorneys immediately take over all communication with the IRS. You don’t have to fear being bullied or harassed by the IRS while DTR is representing you.

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But it’s not surprising given the addiction to tax breaks by both Democrats and Republicans, and the fact that the U.S. tax code is set up to be progressive.

“There’s nothing nefarious going on here,” William Gale, co-director of the independent Tax Policy Center, said on a call with reporters Wednesday.Intentionally or not, Congress set it up this way.

Over the years, lawmakers have increased the number of non-payers by enacting reams of tax breaks – such as tax credits for work, kids and education. And the Bush tax cuts, first passed more than a decade ago, expanded many of them.

Then lawmakers approved temporary tax breaks after the 2008 financial crisis to stimulate the economy, and that expanded the rolls even more, said Robert Greenstein, president of the liberal Center on Budget and Policy Priorities.

The Tax Policy Center estimates that for tax year 2011, 46% of households will end up owing nothing in federal income taxes.

The percentage was closer to 40% before the recession, Greenstein said.

Looking ahead if the Bush tax cuts are allowed to expire next year, the percentage of non-payers could drop to 36%, said Roberton Williams, a senior fellow at the Tax Policy Center.

While the Zero Tax Club includes some very high-income households, it is made up disproportionately of low- and lower-middle-income households.

They, too, may benefit from a bevy of tax breaks, such as tax credits for work and kids. But for many, those types of breaks aren’t the biggest reason why they end up in the non-payer group.

Say lawmakers stripped out all tax breaks except those most elemental to a progressive code — such as the standard deduction and personal exemption, which exempt subsistence-level income and dependents. Even then, about 23% of households would still end up owing nothing in federal income taxes, according to Tax Policy Center research.

In other words, a couple with two kids, earning less than $26,400, would get an $11,600 standard deduction and four exemptions worth $3,700 each, reducing their taxable income to zero.

But if payroll taxes are counted, the number of non-payer households drops precipitously — to an estimated 18% in 2011.

That’s because payroll taxes, which fund the big entitlement programs, hit low-income households harder than most since 100% of their income is subject to them. High-income filers pay a lower percentage of their income in payroll taxes since wages subject to the Social Security tax are capped at $110,100.

Most of those 18% of households that owe neither federal income nor payroll taxes are elderly or had income under $20,000, Williams said.

But even then, they still end up paying something in taxes. Once sales taxes as well as state and local income taxes are thrown into the mix, virtually no household in America would qualify for the non-payer group.

Source: CNN Money

Direct Tax Relief (“DTR”) is a tax resolution company that assists individuals and small businesses with their IRS tax problems as well as State tax problems. Our firm of experienced Tax Attorneys, certified tax preparers, tax resolution specialists and tax consultants specialize in providing IRS tax relief across the country in all 50 states. Once our firm is retained for services and we file the Power of Attorney, our Tax Attorneys immediately take over all communication with the IRS. You don’t have to fear being bullied or harassed by the IRS while DTR is representing you.

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The Board of Public Works on Wednesday held the state property tax to 11.2 cents per $100 of assessed property value.

But Franchot noted that debt service obligations will increase in the next several years to $1.4 billion. He says it’s important the state keep that in mind.Treasurer Nancy Kopp says Maryland has long been recognized for having a prudent system to borrow money for infrastructure at the lowest interest rates.

She also noted that former Gov. Robert Ehrlich set the rate at 13 cents for number of years. She says the board may need to seriously think about going back to that in future years.

Source: AP

Direct Tax Relief (“DTR”) is a tax resolution company that assists individuals and small businesses with their IRS tax problems as well as State tax problems. Our firm of experienced Tax Attorneys, certified tax preparers, tax resolution specialists and tax consultants specialize in providing IRS tax relief across the country in all 50 states. Once our firm is retained for services and we file the Power of Attorney, our Tax Attorneys immediately take over all communication with the IRS. You don’t have to fear being bullied or harassed by the IRS while DTR is representing you.

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Income is anything defined as income that is not income.

Can I reduce my income so I don’t have to pay much tax?

Not unless you make more than $5 million per year. Those making between $25,000 and $4,999,999.99 are taxed at a higher rate. There are, however, itemized deductions that can reduce your tax bill to simply gargantuan, rather than Herculean, proportions.

What is considered a legitimate deduction?

Expenses for household and dependent care services necessary for gainful employment, credit for the elderly and the permanently and totally disabled, adoption expenses, child tax credits, and credits for enormous luxuries available only to the super-rich and privileged.

What is an excise tax, and am I subject to it?

The term is defined in a number of places in the Code. However, nobody knows what it is. We’re sorry. My friend Tim built a boat when he was a teenager. He still pays excise taxes on it. He doesn’t know why, but when the bill comes he pays it rather than risk the consequences of a dispute.

If I do have a dispute, can I appeal?

Of course you can. Be aware that federal and state agencies must justify their use of time just as you do in your job, and if it appears they have expended effort in a matter that returned no income, they will be regarded askance by rather humorless superiors.

Are any deductions uncontroversial?

Of course. They are expenses related to the production of income, as long as you have the receipts. That ride from the airport that cost you $50? You have that receipt, right? The dinner you were forced to pay for out of your own pocket, with those investors from Dubai, which cost you more than $600, you certainly have that receipt, right? Right?

What about alimony?

The deductibility of alimony payments is without question the best, and possibly the only, argument for generous settlement in divorce.

How do rich people and certain corporations manage to pay low taxes or none at all?

Where do we go when we die? How many angels may dance on the head of a pin? Why does gluten-free bread take so long to toast?

Why is the Tax Code so long and complicated?

We refer to you to Title 26, Subtitle E, Chapter 51, Subchapter F, Part III, Sec. 5383, which refers to the sweetening limitations for natural grape wines, and states, “Any natural grape wine may be sweetened after fermentation and before tax payment with pure dry sugar or liquid sugar if the total solids content of the finished wine does not exceed 12% of the weight of the wine and the alcoholic content of the finished wine after sweetening is not more than 14% by volume; except that the use under this subsection of liquid sugar shall be limited so that the resultant volume will not exceed the volume which could result from the maximum authorized use of pure dry sugar only.”

Source: Fortune

Direct Tax Relief (“DTR”) is a tax resolution company that assists individuals and small businesses with their IRS tax problems as well as State tax problems. Our firm of experienced Tax Attorneys, certified tax preparers, tax resolution specialists and tax consultants specialize in providing IRS tax relief across the country in all 50 states. Once our firm is retained for services and we file the Power of Attorney, our Tax Attorneys immediately take over all communication with the IRS. You don’t have to fear being bullied or harassed by the IRS while DTR is representing you.

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Even as President Barack Obama pitches the “Buffett rule” to ensure that millionaires pay at least a 30% tax rate, some commentators are decrying the fact that about half of U.S. taxpayers don’t pay any federal income tax.

But our tax system is more complex than any sound bite or simplistic headline can illustrate.Some multimillionaires do pay a lower effective income-tax rate than some middle-income taxpayers — receiving a chunk of your income via long-term capital gains rather than a paycheck is just one reason that happens. In fact, 1,470 millionaires were among those who paid no federal income tax in 2009, according to IRS data.

But it’s also true that the top 20% of income earners paid 70% of federal taxes in 2007, according to the most recent data available from the Congressional Budget Office. That group also pulled in 60% of total pretax income, according to the CBO.

Meanwhile, 46% of taxpayers won’t owe any federal income tax for 2011, according to the Tax Policy Center, a joint venture of the Urban Institute and Brookings Institution.

But those taxpayers will pay a hefty portion of their income to levies at the federal, state and local level. Those include payroll taxes for Social Security and Medicare; state and local sales taxes on groceries, clothing and other purchases; and federal and state excise taxes on things such as gas, cigarettes, alcohol and airline tickets.

Those taxes can hit different income groups in different ways. For instance, the payroll tax for Medicare is paid by all workers, but the Social Security tax isn’t levied on income over $110,100 (in 2012). So people with bigger six-figure salaries pay a lower portion of their income to Social Security taxes than those earning less.

People pay corporate taxes

Meanwhile, wealthy people bear a bigger share of corporate income taxes, which are ultimately borne by individuals.

“All taxes have to be paid by somebody at some point,” said Steve Wamhoff, legislative director at Citizens for Tax Justice, the liberal lobbying arm of the Institute on Taxation and Economic Policy, a research group. “The corporate tax is paid by the owners of corporate stock and business assets.”

In 2011, federal corporate income taxes ate up an estimated 7.7% of income for the top 1% of income earners, compared with a 0.4% bite for taxpayers in the lowest fifth of the income ladder, according to the Tax Policy Center.

But, partly because taxpayers earn money in different ways, the top 1% of earners saw a smaller share of their income go to payroll taxes: 2%, versus a 6.2% hit for the lowest-income group, according to the Tax Policy Center. (Tax-burden estimates assume that employers’ share of payroll taxes is passed on to taxpayers.)

Then there are state and local taxes to add in. People in the lowest 20% of income earners paid about 17% of their income to federal, state and local taxes in 2011, versus about a 30% effective rate for the top earners, according to an estimate from the Institute on Taxation and Economic Policy. But the share of total taxes paid roughly matches the share of total income for each of the income groups.

For instance, the lowest-income group paid 2.1% of total taxes paid and earned 3.4% of total income, while the top 1% income group paid about 22% of total taxes paid, and had a 21% share of total income. Click here to see chart on income and taxes by income group (PDF).

“The poorest fifth only pay 2.1% of total taxes,” Wamhoff said. “Well, they only get 3.4% of total income.” The tax system is “a little big progressive, but it’s not outrageously progressive.”

Sales taxes can have an outsize effect on lower-income people. “After they buy basic necessities, they typically won’t have a lot of money left over to save or invest,” Wamhoff said. A wealthier family is “more likely to have a portion of their income that they can put to savings or investments that will never be subject to sales taxes.”

No tax due

What about those 46% who don’t pay federal income tax?

Roberton Williams, a senior fellow at the Tax Policy Center, said 23% of U.S. taxpayers don’t make enough money to owe that tax once they take their personal exemption and standard deduction. Another 23% qualify for tax breaks that bring their bill to zero or provide a refund.

“They start off with relatively low income to begin with,” Williams said, “and therefore have low tax liability before claiming any breaks.”

Wealthier people face a tax rate as high as 35% on earnings, “but they get the biggest tax breaks,” he said. “They start off with such a high tax that the biggest tax breaks don’t bring them down to zero. They’re benefiting hugely from tax breaks — much more than the poor people — but because they start off at the high level, their tax bills stay positive.”

For instance, Williams said, about 95% of the benefit of the current 15% tax rate on long-term capital gains and qualified dividends goes to the top 20% of income earners.

Source: Associated Press

Direct Tax Relief (“DTR”) is a tax resolution company that assists individuals and small businesses with their IRS tax problems as well as State tax problems. Our firm of experienced Tax Attorneys, certified tax preparers, tax resolution specialists and tax consultants specialize in providing IRS tax relief across the country in all 50 states. Once our firm is retained for services and we file the Power of Attorney, our Tax Attorneys immediately take over all communication with the IRS. You don’t have to fear being bullied or harassed by the IRS while DTR is representing you.

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But if you slip up, it may be simply a case of hurry up and wait — for your refund. The Internal Revenue Service says a mistake can make your return take longer to process, which may delay any refund.

Here are eight common errors and the IRS’ comments about how to avoid them:1. INCORRECT OR MISSING SOCIAL SECURITY NUMBERS.

When entering SSNs for anyone listed on your tax return, be sure to enter them exactly as they appear on the Social Security cards.

2. INCORRECT OR MISSPELLING OF DEPENDENT’S LAST NAME.

When entering a dependent’s last name on your return, make sure to enter it exactly as it appears on his or her Social Security card.

3. FILING STATUS ERRORS.

Choose the correct filing status for your situation. There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household and Qualifying Widow(er) with Dependent Child. See Publication 501, Exemptions, Standard Deduction and Filing Information, to determine the filing status that best fits your situation.

4. MATH ERRORS.

When preparing paper returns, review all math for accuracy. Or file electronically; the software does the math for you.

5. CARELESS ERRORS.

Take your time. Many taxpayers make mistakes when figuring their taxable income, withholding and estimated tax payments, Earned Income Tax Credit, Standard Deduction for age 65 or over or blind, the taxable amount of Social Security benefits and the Child and Dependent Care Credit.

6. INCORRECT BANK ACCOUNT NUMBERS FOR DIRECT DEPOSIT.

Double-check your bank routing and account numbers if you are using direct deposit for your refund.

7. FORGETTING TO SIGN AND DATE THE RETURN.

An unsigned tax return is like an unsigned check – it is invalid. Also, both spouses must sign a joint return.

8. INCORRECT ADJUSTED GROSS INCOME.

If you file electronically, you must sign the return electronically using a Personal Identification Number. To verify your identity, the software will prompt you to enter your AGI from your 2010 federal income tax return or last year’s PIN if you e-filed. Taxpayers should not use an AGI amount from an amended return, Form 1040X, or a math-error correction made by the IRS.

Source: Associated Press

Direct Tax Relief (“DTR”) is a tax resolution company that assists individuals and small businesses with their IRS tax problems as well as State tax problems. Our firm of experienced Tax Attorneys, certified tax preparers, tax resolution specialists and tax consultants specialize in providing IRS tax relief across the country in all 50 states. Once our firm is retained for services and we file the Power of Attorney, our Tax Attorneys immediately take over all communication with the IRS. You don’t have to fear being bullied or harassed by the IRS while DTR is representing you.

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Most taxpayers have a number of options available to them to slake the IRS’s wrath.

The bad news: Getting more time to pay usually isn’t free. You may face fees, interest charges and possible IRS penalties, too. (The IRS currently charges interest of about 3% on unpaid tax debt, compounded daily.The worst of it is: If you owe $10,000 or more, the IRS may hit you with a lien on your wages or other property, though that’s much less likely if you enter an installment agreement (described below) and make your payments via direct debit.

If you can’t pay your bill, your first task is to file your return so you avoid the steep 5% per month failure-to-file penalty (up to 25% of your unpaid balance).

Then, consider one of these options, depending on your situation:

You are unemployed or a struggling small-business owner

Some taxpayers who are mired in money troubles are eligible for a new form of aid. The IRS announced earlier in March that certain taxpayers will now get six extra months to pay their bill, without facing the failure-to-pay penalty of ½ of 1% of your bill (0.005%) up to 25%. Interest charges will still apply.

The IRS is offering this perk to people who were unemployed for 30 days or more in 2011 or through April 17 in 2012, or who are self-employed and suffered a 25% drop in business income last year.

There are income limits: To qualify, your income must be $100,000 or less if filing single or as head-of-household, and $200,000 or less if married-filing-jointly. For more on how to apply for this program, see this story: TaxWatch: IRS cuts penalties, but don’t forget to file forms.

You owe $50,000 or less

The IRS in March announced new rules for its installment-payment program. Taxpayers who owe $50,000 or less and can pay off that debt over the next six years are eligible for a “streamlined” installment agreement — one that does not require filling out complex forms with the myriad details of your financial life.

Until the IRS rule-change earlier this month, only taxpayers with debt of $25,000 or less, and able to pay that bill over five years, were eligible for streamlined installment plans.

To qualify under the expanded rules for the program, you must agree to make your payments via direct debit.

Go to this IRS page to apply for an online installment agreement.

Or fill out this form to apply for an installment agreement.

If you can pay your full bill within 120 days and you apply online, you won’t have to pay a fee for the installment agreement.

If you need more than 120 days to pay, the fee is $52 if you choose direct debit, $105 for a standard agreement or $43 for eligible low-income filers. See this IRS page for more on fees.

See this IRS page for more on the new installment-plan rules.

If you’re OK with making direct-debit payments from your account, and are confident in your ability to stick to the payment plan without defaulting (and thus incurring a possible IRS lien), an installment agreement may make more sense financially than paying by credit card.

Charging a tax bill generally means paying a 2% to 4% “convenience” fee or a flat fee, depending on the payment provider.

“The credit-card fees are pretty steep, and right now the interest rate with the IRS is 3%, so taxpayers are usually better off right now entering into the installment agreement versus paying the fees for the credit card,” said Lisa Miller, an enrolled agent with LM Tax Consulting Services in Summerfield, N.C.

That said, you should run the numbers for your own situation. With the IRS installment plan, you’ll pay the fee, plus interest and the failure-to-pay penalty of 0.005% per month up to 25% on your unpaid balance

You owe more than $50,000

If you owe more than $50,000, you may still qualify for the installment agreement — if you can pay down your bill to the $50,000 mark.

Taxpayers “do have the option of paying the balance due below the $50,000 threshold in order to quality for the streamlined installment agreement,” Miller said.

“However, if that’s not possible, the taxpayer will have to provide the IRS with a collection information statement,” she said.

That’s a painfully detailed financial statement. See IRS Form 433-A. Or you might get this one: See IRS Form 433-F.

Then the IRS determines whether you qualify for an installment agreement. Read more about payment plans on this IRS page.

Can’t pay a cent

Another option, of course, is the “offer in compromise,” a program made infamous by many late-night television ads promising taxpayers that they can pay “just pennies on the dollar.”

Don’t count on it.

“If you qualify for an offer in compromise, you can settle a tax debt for less than what is owed — but the key to it is to qualify,” said Audrey Griffin, an enrolled agent and founder. Offers in compromise are available only to taxpayers who have essentially exhausted their other means of paying the tax debt.

“I get questions about this frequently from taxpayers who have rental property that has equity, their home has equity, they have IRA accounts, a savings account,” Griffin said.

“In many situations, it isn’t that they can’t pay. It’s that they don’t want to pay,” she said.

Still, the IRS in February 2011 made it somewhat easier for people to qualify for OICs, including making the program available to people who have unpaid tax debt as high as $50,000, up from a limit of $25,000 before, and hiking the income limit, so that people with annual income of $100,000 are eligible, up from $50,000 before.

Source: Market Watch

Direct Tax Relief (“DTR”) is a tax resolution company that assists individuals and small businesses with their IRS tax problems as well as State tax problems. Our firm of experienced Tax Attorneys, certified tax preparers, tax resolution specialists and tax consultants specialize in providing IRS tax relief across the country in all 50 states. Once our firm is retained for services and we file the Power of Attorney, our Tax Attorneys immediately take over all communication with the IRS. You don’t have to fear being bullied or harassed by the IRS while DTR is representing you.

Complete the Free Tax Consultation form and an experienced Tax Professional will contact you to discuss your situation. Don’t Wait — Get Help Today!

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