August 10, 2020
New Jersey tax experts are urging their clients not to fear the IRS if they can’t file their full tax returns due to COVID-19.
What Are Your Options if You Can’t Pay the Full Amount on Your Tax Returns?
- An installment agreement. If you think you will be able to pay your taxes in full within a definite time frame, tax experts recommend setting up an installment agreement with the IRS. Once the agreement is set up, you may make electronic monthly payments online or by phone using Electronic Federal Tax Payment System (EFTPS), or simply by check, money order or debit/credit card. Individual filers may also choose the Direct Pay option and make monthly payments directly from their checking or savings account.
- Currently Not Collectible status. If you are unable to afford monthly tax payments along with your living expenses, tax accountants recommend trying to qualify for Currently Not Collectible status. In this case, the IRS will not try to collect from you, but interest and penalties still may accrue. This is generally the least favorable option because you may accrue up to 25% interest if you don’t make any payments at all.
- Offer in Compromise program. The IRS’s Offer in Compromise program allows tax filers in New Jersey and elsewhere to settle their tax debt for less than the full amount owed. The offer will generally be accepted if the IRS finds that the amount offered represents the most they can expect to collect in a reasonable period of time. Specifically, they will look at: 1) your ability to pay; 2) income; 3) expenses; and 4) asset equity. If the offer is accepted, any refunds due in the same calendar year will be applied to your tax debt, and you must meet all the Offer Terms in Section 7 of Form 656.
New Jersey financial and tax experts believe that the IRS may be more lenient this year due to the unprecedented circumstances brought on by COVID-19. Here at Frank W. Kapitza & Associates, we are experts at helping late filers negotiate with the IRS and get their payments in with as few penalties as possible. Contact us at (973)-276-0650 or email@example.com so we can get right to work!