There is every reason to expect bad news from the IRS once you are late with your payments. While this may be true, the IRS offers defaulting taxpayers many options to settle their tax debts to avoid penalties, interest, and other undesirable consequences. The options, such as an offer in compromise and a penalty abatement, present many benefits to taxpayers. Let’s look at some of the benefits of settling IRS tax debts.
1. Avoid Penalties and Interest
The main benefit of settling IRS tax debts is avoiding additional interest charges and penalties. The IRS charges a 0.5% failure to pay penalty per month, which can go up to 25% of your unpaid taxes. Settling tax debts as soon as possible results in lower penalties. In addition to the penalties, any outstanding balance owed to the IRS will continue to accrue interest. The interest rate is 3% plus the current short-term federal funds rate. Interest will not go away unless the actual tax liability is lowered, but you may be able to lower your balance by applying for IRS penalty abatement depending on your eligibility.
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2. No-Risk of Defaulting on Agreement
If you have successfully negotiated an IRS tax installment agreement with the IRS, you have to ensure timely payments. Any delay on your part can lead to the termination of the agreement, or you have to pay an additional reinstatement fee to get back on the installment agreement plan. The IRS doesn’t remind you of due dates, which is why we always recommend setting up a direct debit. If you don’t have enough money in your account, it will discontinue the installment agreement by default. If you are having trouble sticking to the installment plan, you can approach a federal tax attorney to explore avenues like an offer in compromise to settle your tax debt if eligible.
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3. Prevent a Lien
If a taxpayer owes more than 10,000 dollars to the IRS, the government agency has the discretion to file a lien on their assets. This lien may hinder your ability to acquire loans or mortgages. Even if a taxpayer with a lien is able to convince a bank to give them a loan, the bank may require a lien subordination, lien release, or lien withdrawal to finalize the loan. Additionally the bank may also inflate the interest rates in order to protect their interest. Once the IRS tax liability has been paid in full, the IRS is required to remove the liens within 30 days of receiving the payment.
A tax attorney can help you navigate IRS resolution options, enabling you to catch up on your taxes. If you are looking for a trusted Dallas – Fort Worth tax attorney to give you options, including offer in compromise tips and any other assistance related to IRS tax debt, look no further than the Law Offices of Nick Nemeth. We provide IRS debt help to hundreds of taxpayers facing a range of IRS tax problems. Reach out to us for a no-obligation consultation. Simply call (972) 426-2553 or fill out our contact form, and we’ll get back to you as soon as possible.