You know you owe the IRS, but you don't know what to do about it.
/24-7PressRelease/ - NORTH CHARLESTON, SC, August 22, 2007 - Pay the debt off as quickly as possible says both Mary Rivera, JK Harris and Company Licensed Taxpayer Representative, and the IRS.
Both, in fact, encourage taxpayers to get some type of loan or pay the liability with a credit card because the interest rates are lower than the combination of interest and penalties the IRS would charge.
"You can go and get a personal loan from friends or relatives, or you can get a home equity loan," Rivera said. "Senior citizens can do a reverse mortgage. The interest rate from the IRS is the current short-term rate plus three."
If you absolutely cannot pay the balance in full, you can request an Installment Agreement (IA), which means making monthly payments to the IRS over a set amount of time. To be eligible for an Installment Agreement, all tax returns must be filed.
According to Rivera, there are three kinds of Installment Agreements:
* Guaranteed is when you owe less than $10,000 and pay it off in 36 months.
* Streamlined is when you owe less than $25,000 and pay it off in 60 months.
* Partial Payment is when you owe more than $25,000 and make monthly payments until the liability is paid in full or the 10-year statute date runs out, whichever comes first. For this type of Installment Agreement, you must provide the IRS with Form 433F, Collection Information Statement, and documentation that shows your financial situation. This documentation includes, but is not limited to income statements, bank statements, investment statements, mortgage statements, utility bills and medical bills.
"The key is the more you put down in the beginning, the lower the interest and penalties will be," Rivera said.
In other words, if you owe $35,000 and you make a down payment of $11,000, you will qualify for a Streamline IA because your balance will be under $25,000. You can send that $11,000 payment with completed Form 9465, Installment Agreement Request, directly to the IRS. The IRS will inform you within 30 days whether your request is approved, denied or if additional information is needed.
Or you can contract with JK Harris and they will complete any and all necessary forms and negotiate a monthly payment plan for you. Those monthly payments can be made by personal check, money order, cashier's check, cash, credit card electronic funds transfer, direct debit from your bank or through payroll deduction.
"The best way is through payroll deduction, but some people don't like that because they don't want anyone to know they owe the IRS," Rivera said. "The next best way is direct deduction from your bank account."
The IRS does charge a one-time user fee for new Installment Agreements. The normal fee is $105. However, if the payments are to be automatically deducted from your bank account, the fee will be $52. Individuals who have income at or below certain levels may be eligible for a reduced fee of $43.
Once your IA is in place, there are some important things to remember:
* You cannot incur another debt, meaning while you are in the Installment Agreement, you must file all returns on time and pay any balances due in full.
* The IRS will keep any future refunds from your tax return until the liability is paid in full.
* Penalties and interest continue to accrue on the unpaid balance.
* Even if you set up an IA, the IRS may still file a Notice of Federal Tax Lien to secure the government's interest until you make your final payment.
Rivera also said to beware of defaulting on your Installment Agreement.
"If you miss one payment, the IRS probably won't do anything," Rivera said. "If you miss a second payment, you will get a letter stating you are in default. If you miss a third payment you will get a notice of intent to levy."
That CP 523 notice tells the taxpayer they have defaulted on their Installment Agreement and notifies them of the IRS' intent to levy certain assets.
Once an Installment Agreement has defaulted, a taxpayer can have it reinstated for a $45 fee, regardless of their income level.
"Installment Agreements can be reinstated maybe one or two times," Rivera said.
After that, a taxpayer may have to try some different options, such as "Currently Not Collectible" status or an Offer in Compromise.
According to the IRS, in 2004, 2.5 million taxpayers set up Installment Agreements to pay their liability.
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About JK Harris:
JK Harris & Company, LLC, (www.jkharris.com) based in North Charleston, S.C., is the nation's largest tax resolution firm and has served over 200,000 customers since its founding in 1997 by John K. Harris. JK Harris consultants are available to meet with consumers in over 450 locations nationwide by appointment only. The company also provides services for consumer and commercial debt, student loan debt, investment fraud, financial planning, tax return preparation, and audit representation.
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