Overdue Taxes and the Internal Revenue Service
Federal law requires individuals to file a tax return every year they earn taxable or reportable income. When taxes are not paid in full the IRS applies penalties and interest. Penalties and interest are compounded daily, so the amount owed continually increases.
If you want to bring your tax record current, consider the following:
Filing Requirement.
If you had income below the filing requirement or no taxable income, you might not be required to file a tax return. IRS Publication 17, Individual Income Tax Guide, contains information on filing requirements.
Reportable Income.
Not all income is taxable. Wages, tips, Social Security, and self employment income are taxable. SSI benefits, state aid, Medicare, Medicaid, veterans’ benefits, and food stamps are nontaxable income.
Get Help From an Accountant.
Tax laws are complicated. To get the best possible outcome with a minimum amount of frustration, work with an accountant who knows the laws and language of the IRS system.
Explore Options.
If you file a late return or owe taxes due to an extreme health condition, you can ask for an extension or a tax break. On the front of each tax return, attach a letter explaining when you were diagnosed HIV+ and that symptoms prevented you from filing on time. If your doctor issued you a letter declaring you terminally ill, include it with your own letter.
If you want to bring your tax record current, consider the following:
Filing Requirement.
If you had income below the filing requirement or no taxable income, you might not be required to file a tax return. IRS Publication 17, Individual Income Tax Guide, contains information on filing requirements.
Reportable Income.
Not all income is taxable. Wages, tips, Social Security, and self employment income are taxable. SSI benefits, state aid, Medicare, Medicaid, veterans’ benefits, and food stamps are nontaxable income.
Get Help From an Accountant.
Tax laws are complicated. To get the best possible outcome with a minimum amount of frustration, work with an accountant who knows the laws and language of the IRS system.
Explore Options.
If you file a late return or owe taxes due to an extreme health condition, you can ask for an extension or a tax break. On the front of each tax return, attach a letter explaining when you were diagnosed HIV+ and that symptoms prevented you from filing on time. If your doctor issued you a letter declaring you terminally ill, include it with your own letter.
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Paying Overdue Taxes
Options for paying taxes and penalties owed to the IRS include:
Full Payment.
Pay the full amount, including tax, interest, and penalty.Installment Program.
You can request to pay what you owe in monthly installments, i.e., if you owe $1,200, you could offer to pay $100 a month, plus interest at the end of the year.Uncollectible Status.
If the IRS judges that your income level is insufficient to pay for the necessities of life and income taxes, your account can be placed in Uncollectible Status. This means that the IRS will stop trying to collect from you, but it does not cancel the debt, and interest owed continues to accrue daily.Offer In Compromise.
If you are confident that you will never be able to pay the full amount that you owe, you can make an offer to cancel the amount you owe. For example, if you owe $10,000 to the IRS, you might offer to pay $2,000 to settle. This will be accepted only under extreme circumstances, in which the IRS has ruled out the possibility of an Installment Program or Uncollectible Status. If you are considering this option, seek professional help.It can be intimidating to approach the IRS. As scary as it may seem, repaying your overdue taxes will benefit you. Your reported income and how much you have paid in taxes over the years will affect the amount of your Social Security and Medicare benefits. Filing your taxes also affects your eligibility for educational grants, credit, and loans. Remember, you don't have to work with the IRS on your own. Seek help from an accountant and ask friends and your case manager for support.
For more information for Offer-in-Compromise go to: www.irs.gov/payments/offer-in-compromise
For more information on taxes, forms and publications and how to contact your local office go to:
www.irs.gov