Getting out of an IRS mess.Q I owe more than $20,000 in back taxes. I have been looking to do an installment agreement, but I also wanted to know if I could do an offer in compromise. What's the best way to go? --Anonymous Via the Internet A First pay as much as you can toward your tax bill, since any outstanding balance will continue to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. interest (the federal short-term rate plus 3%, compounded daily) and penalties. With an Installment Agreement (Form 9465), the IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. will take monthly payments. You choose the amount and due date, however, you must provide financial documentation showing you can't pay what you owe in a lump sum Lump sum A large one-time payment of money. . Once the IRS accepts your plan, you must pay every month, on time. If you miss a payment or have outstanding unpaid taxes in a future year, you will be in default and the IRS could take action to collect the entire amount owed. There are alternatives. Consider borrowing against your 401(k) or against equity in other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. , such as your house. Or you can liquidate To pay and settle the amount of a debt; to convert assets to cash; to aggregate the assets of an insolvent enterprise and calculate its liabilities in order to settle with the debtors and the creditors and apportion the remaining assets, if any, among the stockholders or owners of the assets such as stocks or bonds. An Offer in Compromise (Form 656) is an agreement with the IRS that lets you resolve your tax bill for less than you owe; the general rule is at least 14% of the amount owed must be paid. The IRS is more likely to consider such an offer after all other payment options have been exhausted. Since full disclosure is required, the government will find out every detail of your finances. Mail your money management questions to Money Matters, BLACK ENTERPRISE 130 Fifth Ave., New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , NY 100011 or send an e-mail to brown@blackenterprise.com |
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