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Let's make a deal.

The Internal Revenue Service reported that recent changes in its collection policy were prompting taxpayers to cooperate with the government.

Since early 1992, the IRS has made it easier for taxpayers to set up installment payment plans. The service also has been more receptive to offers in compromise--settlements involving less than the full amounts owed. According to internal revenue news release IR-93-45, the number of taxpayers with installment agreements and accepted offers in compromise increased more than 30% in the last year.

Installment agreements have always been the most popular way of paying back taxes. The IRS has allowed more of its employees to accept such agreements, including those working in Taxpayer Services and Examination. For most debts under $10,000 it no longer requires taxpayers to give financial statements and does not file tax liens.

According to the service, 97% of individuals who owed taxes each had a total debt under $10,000. However, to take advantage of the new policies these taxpayers not only had to make their installment payments but also had to meet all tax obligations on time for the agreement's duration.

For those who can pay something but won't ever be able to pay their entire tax debt, the IRS has provided another alternative, offers in compromise, which have been on the books for years but were rarely used because of IRS resistance. However, in early 1992 the government gave its collection officers more authority to accept such offers.

In the first six months of this fiscal year, the number of offers in compromise received by the service jumped to 23,683-compared with 5,604 in the same period last year--and the acceptance rate climbed to 55%, from 25% in 1991.

Taxpayers considering such settlements should try to raise funds, including loans from relatives or friends, so they can make a satisfactory offer. If accepted, such settlements between the government and taxpayers require all taxes be paid on time for the following five years.

Observation: The most recent IRS collection innovation is form 9465, on which taxpayers request installment plans when they file their returns. Nearly a million of these forms were filed in the first half of the year.

Taxpayers should attach forms 9465 to their returns if they cannot pay their balances due. The forms also can be used to ask for installment plans on receipt of tax bills from the government.
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Title Annotation:installment tax payment plans
Publication:Journal of Accountancy
Article Type:Brief Article
Date:Sep 1, 1993
Previous Article:Notes that cancel at death mean estate owes income tax.
Next Article:1993 interest rate for demand loans.

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