Owe Uncle Sam?
Now You Can Settle for Pennies on the Dollar
IRS's "Offer In Compromise" program allows taxpayers to settle their tax debt for a fraction of the taxes owed ? sometimes as much or more than 85% reduction. Even better, the program is applicable to both income and payroll taxes owed.
By GEORGE VARGHESE, EA
While President Bush attempts to cut taxes further, many Americans are already taking advantage of the best tax cut in town.
Over 85% tax cut is now possible for taxpayers who simply can't afford to pay the huge tax debts they've run up. In what may be the best-kept secret in America, many taxpayers are legally cutting their tax debts by over 85%.
President Bush's tax cut may help taxpayers lower their future tax bills, but it doesn't take into account the over 26.3 million taxpayers who already owe the IRS over $214 billion in old taxes.
The well kept secret on the over 85% tax cut is an IRS program called Offer In Compromise, which allows taxpayers to pay much less than they owe on old taxes. This IRS program has been around for a long time but amazingly few taxpayers or even tax prepares have heard about it. And the best part is, it is rather simple to use.
This is how the Offer In Compromise program works:
1. You need to owe the IRS some old taxes. (Old taxes could include your income taxes for the year 2004 that you just filed or will be filing)
2. Old taxes can include payroll taxes or income taxes or both
3. Any penalties or interest owed could also be eligible
4. You need to be current on all tax return filings
5. Determine how much money and assets you have in your name. The less you have the better
6. Determine how much money you have left over at the end of the month after paying your living expenses. Again, the less the better
7. Prepare and file IRS Form 656-Offer In Compromise (this form shows how much money you owe the IRS in old taxes and allows you to tell the IRS how much you can pay? you can offer to pay them as little as you want).
8. Provide the IRS with documentation (if and when they request it) to verify how much money and assets you have, along with your monthly living expenses.
9. Wait for IRS acceptance letter telling you they've accepted your offered amount as full settlement for all taxes penalties and interest
10. If for some reason the IRS denies the amount you offer, you can file an appeal to have your offer reviewed by an appeals officer at the IRS. (The goal of IRS Appeals Officer is to settle every case)
Often taxpayers who want to take advantage of this great program have little or no money on hand to offer the IRS. To overcome that problem the IRS will now let taxpayers make monthly payments on whatever amount they settle for on the old tax debt.
Sometimes taxpayers with old tax debts get frustrated with owing so much in taxes that they give up on themselves financially. This causes them to do nothing and their tax debts just continue to grow. Don't fall into the do-nothing-trap.
If you owe old income or payroll taxes, don't wait for President Bush's Tax Bill, instead take advantage of the currently available over 85% tax cut today.
George Varghese, EA, is a member of the American Society of IRS Problem Solvers and Enrolled to Practice before IRS. You can contact him at 678-380-4520 to obtain a free subscription to his monthly newsletter.
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