Are you behind with your income taxes? Do you wish to know what happens if you owe money to the IRS? In this blog, let us discuss in detail what happens if you owe money to the IRS. Make sure to continue to read till the end so that you will get all the minute details at USTAXFiling.
Are you behind with your income taxes, with an outstanding amount owed to the Internal Revenue Service? If so, you must be thinking about what the possible options are for expats and taxes. Luckily, there are many, and we at USTAXFiling are here to assist you; depending on the severity of your circumstances, you may tackle this balance because of the IRS (Internal Revenue Service). Here are a few of the most common situations income taxpayers may find themselves in and the possible options to remedy the case.
Do You Anticipate Owing Taxes With Your Tax Return This Year?
If you are thinking that you may have a tax liability with your income tax filing this year, you must ensure to pay your amount due by the 15th April filing deadline to eliminate any of the late filing charges. You might be hit with an additional liability if you hit after this date in the form of a failure to pay a penalty of 0.5 percent of monthly until paid, along with accrued interest on top of your income taxes due.
If you have any outstanding amount due with your income tax return and you cannot pay the balance by the given deadline, you should still file your return by the deadline. While the failure to pay any charges is assessed as 1/2 percent monthly, filing your income tax return past the deadline may trigger an assessment of the higher failure to file charges of five percent of unpaid taxes monthly until your income tax return is filed. The failure to file charges may be eliminated if your income tax return is filed timely.
Does Your Total Tax Balance Due Include Penalties?
Did you make any mistake on your income taxes this financial year or have extenuating scenarios that led to assessed charges on your bank account? The IRS (Internal Revenue Service) might assist you with a charge or an abatement waiver if you demonstrate any reason for being non-compliant with your income taxes. There are two methods to request charges abatement from your bank account:
1. First-Abatement for Taxes and Expats
The IRS permits an FTA charge waiver for income taxpayers who have good records for the previous three years of income tax filing. With this waiver, the IRS might abate the failure to pay or even failure to file charges for a single financial year. To become eligible for the First Abatement for expats and taxes, you should meet the necessary threshold:
- You have arranged or paid to pay any outstanding tax due.
- You filed all current income tax returns or an extension of time to file your taxes.
- You did not have to file a return in the past, or you have no charges for the past three years to the financial year in which you have received the penalty.
Before requesting the FTA penalty waiver, you should first wish to pay the tax due completely. You can then request the waiver by calling the IRS (Internal Revenue Service) directly by sending a written letter or over the call to the IRS. If you prefer to request the waiver through a written letter, ensure to include a statement that states your eligibility depending on the above three points. Include your name, Social Security Number, financial year, and the information about the charges that you are requesting an abatement for, including the amount and charges.
2. Reasonable Cause for Taxes and Expats
If you are not eligible for the First time abatement charges waiver, but you feel that your charges are related to any extenuating situation or error, you may still try to request abatement by offering the IRS with a reasonable reason. A statement that explains the case to the IRS and also demonstrates that your failure to be compliant with your income taxes was not willful, and you attempted to file income tax, but due to a situation outside of your control, you couldn’t file taxes.
You may also submit the reason that requests the abatement of charges to the IRS in any of the two ways. You may either offer a formal submission through Form 843: You may request for abatement and claim for refund and also include it with your income tax return, or you may even submit an informal claim in the form of written information to the IRS with the details about your scenario and the reasonable purpose of the statement. If you prefer to send a written letter to the IRS, ensure to include your name, the financial year, your social security number, and the specific charges and amount for which you are requesting abatement.
Do You Have Time to Pay Your Taxes in Full?
If you need more time, up to 4 months or longer, that might exceed four years, installment payment and payment agreements are available to assist you in paying your tax liability entirely. You may pay your income taxes completely within four months. Then, you might consider a complete payment agreement. If you need more time to pay your income taxes, you might even request up to 120 days to pay your account entirely. Can you pay your income taxes in full within four months? Then, you might consider a complete payment agreement. If you need more time to pay your income taxes, then you have to request up to 4 months to pay your account.
No charges are assessed for the complete payment agreement. But interest and any applicable charges may continue to add until your liability is paid entirely. The advantage is that the IRS (Internal Revenue Service) may hold on to any collection proceedings by calling the IRS at 1-800-829-1040 or filling out the application form online.
Do you need more time to pay your income taxes? You might even choose an installment plan. The IRS might help you establish an installment plan to make a series of monthly payments to the IRS with time. IRS does charge some amount when you enter into an installment agreement.
To establish an installment agreement, you may use one of three options. If you have not filed your income tax return, ensure to submit an installment agreement request or form 9465 and include it with your income tax return filing. If you have filed your income tax return, you may use the online agreement tool or even call the IRS at 800-829-1040 and establish the installment plan on the phone.
Expats and Taxes: Do You Owe More Than You Can Pay?
If you owe more than you have to pay, the IRS does negotiate income taxes through OIC (Offer in Compromise). An OIC (Offer in compromise) is an agreement between the IRS and you that solves your tax liability by payment of an agreed amount. It is only considered in special cases. You have to show at least your net worth is reduced by your debt. In simple terms, this can be a case of bankruptcy.
Are You Unable to Pay Your Income Tax Balance Due at All?
If you cannot pay your income tax amount, as it might prevent you from meeting your basic living needs, you may request that the IRS delay collection until you pay. You may call the IRS and talk to them about your case. You might have to fill out a collection information statement and offer proof of financial status that includes details about your monthly income and your expenses and assets.
If the IRS considers that you cannot pay any of your income tax debt due to the financial crisis, they might delay temporary collection by reporting your account as currently not collectible until your financial state improves. The charges and interest might continue, and the debt won’t go away. It will continue till the balance amount is completely paid. But you will get a reprieve temporarily.
Expats and Taxes are USTAXFiling’s Specialty!
USTAXFiling experts are here to assist you in knowing how simple becoming tax compliant can be. Our USTAXFiling experts are highly skilled and have years of rich experience, so you don’t have to worry as they help you with income tax filing. They make sure to resolve all your income tax-related queries as soon as possible. They also have all the updates related to income tax filing so that you get every exclusion and deduction. So, your wait is over now. Call USTAXFiling, your income tax consultant, right away!