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Okay. Let us talk about how to get the IRS to accept a pay out plan for the again taxes you owe. Malcolm C. of Lexington, KY writes me asking how he can set up a payment prepare with the IRS on his $19,000 tax debt. Let us assessment some of the facts of the scenario very first: 1. Malcolm owes for two decades 2003 and 2004. 2. All of his tax returns are filed. 3. He is not below a existing levy/garnishment. four. He does not owe for business taxes, just personalized. It turns out Malcolm claimed "exempt" on his W-four for 2003 and 2004 to check out to get some extra dollars. And now the IRS needs their cash. The IRS would like Malcolm to spend $753 per month on a payment plan. But he can only afford to pay out $400 per month. What are his options? This is a really frequent circumstance that I see around and more than once again with my clientele. Very first of all, you will by no means get away with claiming "exempt" on your W-four. Ultimatelyyou will constantly have to pay out the piper (in addition penalties and curiosity). In virtually every single situation, the further money you obtained during the exempt period just isn't well worth the trouble and expense you experience later on. If the IRS desired to get super technical about it, they could almost certainly make a criminal cost of tax fraud stick by claiming that you knowingly and willfully underwithheld on your cash flow taxes. Nevertheless, the probabilities of you obtaining even investigated (let on your own indicted) are following to none in a situation like this. Bottom line: Just do not do it. Resolution: The very best point for Malcolm to do is contact the IRS ACS (Automated Collection System) line at 1-800-823-1040 and request a "Streamlined Installment Agreement." A Streamlined Installment Agreement is available to any taxpayer as a make any difference of correct if you owe significantly less than $25,000 have all of your tax returnsfiled and only owe for individual income tax (no enterprise payroll tax debts). The Streamlined Installment Agreement is calculated by taking your total tax liability (in this situation $19,000) and dividing it by sixty months. So Malcolm is hunting at a month to month payment of roughly $320 to $325 per month over the subsequent 5 years (sixty months) that he can set up with the IRS ACS unit. The advantage of a Streamlined Installment Agreement is that the IRS will not levy or garnish you as long as you are on the spend strategy. It turns into one more month-to-month bill and you just shell out it for the subsequent 5 many years (it will truly be a small longer than five a long time given that penalties and interest will still accrue). Now the IRS reserves the proper to file a Federal Tax Lien even if you are making the payments to preserve their interest in the credit card debt till it is compensated in complete, so really don't be shocked if this takes place. Bear in mind a Lien and a Levy are two diverse items. The lien will not consider your income, your wages, or your home. It just sits on your credit score report till the debt is compensated. Also, you will need to make positive that you remain compliant for the future. Any non-compliance will place the agreement in default and then all bets are off. The IRS defines "compliance" in this case as making positive all of your returns are filed on time (typically by April 15th) and that you do not operate any new balances (all taxes are compensated by April 15th for the prior year). Great luck Malcolm. In a long term post I will explain how you can get a reduction in a comparable situation by getting the penalties and interest on penalties eliminated.
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