IRS Procedures > Collection Procedural Questions

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Frequently Asked Tax Questions

IRS Procedures - Collection Procedural Questions

Rev. date: 1/2010

I am unable to pay my delinquent taxes. Will the IRS accept an Offer in Compromise?

Bill/Debt/Liability
Monthly Payment Plan/Installment Agreement
Offer in Compromise
Tax Bill/Debt/Liability

You may qualify for an Offer in Compromise if you are unable to pay your taxes in full or if you are facing economic hardship or other special circumstances.

Note:

Offer in Compromise Application Fee - Your offer must include the $150 application fee or a completed Form 656-A, Income Certification for Offer in Compromise Application Fee and Payment. If you are requesting an exception of the fee because of your income. Offers received without the $150 fee or a complete Form 656-A will not be accepted for processing. Please see Step Five on Page 12 of this package for more information on the application fee and to determine if you qualify for the exception.

Refer to Tax Topic 204, Offers in Compromise, for additional information.

Rev. date: 1/2010

Is there any special assistance available if you are experiencing economic harm or as systemic problem, or are seeking help in resolving tax problems that have not been resolved through normal channels?

Offer in Compromise
Taxpayer Advocate

Yes. The Taxpayer Advocate Service (TAS) is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should.

The service is free, confidential, tailored to meet your needs, and available for businesses as well as individuals. There is at least one local taxpayer advocate in each state, the District of Columbia, and Puerto Rico.

You can contact TAS by:

Calling the TAS toll-free case intake line at 877-777-4778 or TTY/TDD 800- 829-4059,
Calling or writing your local taxpayer advocate, whose address and phone number are listed in the government listings in your local telephone directory and in Publication 1546, Taxpayer Advocate Service – Your Voice at the IRS, or
Filing Form 911, Request for Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order), with TAS, or
Asking an IRS employee to complete Form 911 on your behalf.

To get a copy of From 911 or learn more about TAS go to www.irs.gov/advocate.

Rev. date: 1/2010

Can I make installment payments on the amount I owe?

Monthly Payment Plan/Installment Agreement

Yes. If you cannot pay the full amount due as shown on your return, you can ask to make monthly installment payments. If your request to pay in installments is granted, the following conditions apply.

You will be charged a one time user fee of $105.00, for direct debit agreements, the fee will be $52.00.
Interest is charged on any tax not paid by its due date, and
You will be charged a late payment penalty unless you can show reasonable cause for not paying the tax by the due date (April 15, 2010) for individual income tax returns Penalty will be charged until it reaches 25% of the original balance due and interest will be charged until the account is fully paid.
Before requesting an installment agreement, you should consider less costly alternatives such as a bank loan.

To request an installment agreement send Form 9465 (PDF), Installment Agreement Request, with your return. To request a payroll deduction installment agreement, use Form 2159, Payroll Deduction Agreement.

To request a direct debit Installment Agreement, use Form 433-D, Installment Agreement.

1. Advantages of a direct debit installment agreement to the taxpayer include:

Reduced user fee
No check to be mailed
Postage savings
No check processing charges
No problem remembering to make the monthly payment

You should receive a response within 30 days if you submit the form with your return. For more details on installment payments, refer to the references below. Or call the IRS toll-free at 800-829-1040.

Rev. date: 3/2010

What kind of interest and penalties will I be charged for filing and paying my taxes late?

Bill/Debt/Liability
Interest
Interest and Penalties
Penalty for Underpayment
Tax Bill/Debt/Liability
When To File

Interest is compounded daily and charged on any unpaid tax from the due date of the return until the date of payment.

The interest rate is the federal short-term rate plus 3 percent. That rate is determined every three months.
For current interest rates, go to News Releases and Fact Sheets and find the most recent Internal Revenue release entitled Quarterly Interest Rates.

In addition, if you filed on time but didn't pay on time, you'll generally have to pay a late payment penalty.

The late payment penalty is one-half of one percent of the tax (0.5%) owed for each month, or part of a month, that the tax remains unpaid after the due date, not exceeding 25 percent.
You will not have to pay the penalty if you can show reasonable cause for the failure.
The one-half of one percent rate increases to one percent if the tax remains unpaid after several bills have been sent to you and the IRS issues a notice of intent to levy.
Currently, if you filed a timely return and are paying your tax via an installment agreement, the penalty is one-quarter of one percent for each month, or part of a month, that the installment agreement is in effect.

If you did not file on time and owe tax, you may owe an additional penalty for failure to file unless you can show reasonable cause.

The combined penalty is 5 percent (4.5% late filing, 0.5% late payment) for each month, or part of a month, that your return was late, up to 25%.
The late filing penalty applies to the net amount due, which is the tax shown on your return and any additional tax found to be due, as reduced by any credits for withholding and estimated tax and any timely payments made with the return.
After five months, if you still have not paid, the 0.5% failure-to-pay penalty continues to run, up to 25%, until the tax is paid.
The total penalty for failure to file and pay can be 47.5% (22.5% late filing, 25% late payment) of the tax owed.
If your return was over 60 days late, the minimum failure-to-file penalty is the smaller of $100 ($135 for returns required to be filled after December 31, 2008) or 100% of the tax required to be shown on the return.

Note: If you feel this as assessed in error you may refer to Publication 1, Your Right as a Taxpayer.

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