Frequently Asked Tax Questions
IRS Procedures - Collection Procedural Questions
Rev. date: 12/21/2012
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. If you are requesting a low-income exception of the fee, you
must complete section 4 of the
Form 656,
Offer in Compromise.
Offers received without the $150 fee or a completed section 4 of the Form 656 will not be accepted for processing. Please see Step 6 on Page 4 of the
Form 656-B,
Offer in Compromise Booklet, for more information on the application fee, and section 4 of the Form 656 to determine if you qualify for the low-income exception. Please also see Steps 2 and 3 on Page 4 of the Form 656-B to determine whether your application must include either a completed
Form 433-A (OIC),
Collection Information Statement for Wage Earners and Self-Employed
Individuals, or
Form 433-B (OIC),
Collection Information Statement for Businesses.
- If you are not granted an Offer-in-Compromise and you are still unable to pay your delinquent taxes in full, you still may be eligible for an installment agreement. File
Form 433-D,
Installment Agreement, and pay a $105 user fee, which we have the authority to deduct from your first payment(s) ($52 for Direct
Debit).
- If you default on your installment agreement, you must pay a $45 reinstatement fee if we reinstate the
agreement.
- Refer to
Tax Topic 204 - Offers in Compromise, for additional information.
Rev. date: 12/21/2012
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. Because advocates are part of the IRS, they know the tax system and how to navigate
it.
You can contact TAS by:
- Calling the TAS toll-free case intake line at 1-877-777-4778 or TTY/TDD
1-800- 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,
- 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.
Rev. date: 12/21/2012
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 user fee will be reduced to
$52.00.
- Interest is charged on any tax not paid by its due date, until the account is fully
paid.
- You will be charged a late payment penalty unless you can show reasonable cause for not paying the tax by the due date of the return. The penalty will be charged until it reaches 25% of the original balance
due.
- 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 (PDF),
Payroll Deduction Agreement.
To request a direct debit installment agreement, use
Form 433-D (PDF),
Installment Agreement.
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
Many taxpayers may qualify to use our automated
Online Payment Agreement Application. Please review our page
Payment Plans, Installment Agreements, for additional information. 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: 12/21/2012
Interest is compounded daily and charged on any unpaid tax from the due date of the return (without regard to any extension of time to file) 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 Release and Fact Sheet Archive
and find the most recent Internal Revenue release entitled Quarterly Interest
Rates or alternatively, search "quarterly interest rates" on our website,
www.irs.gov.
In addition, if you didn't pay your tax 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
payments.
- 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, however, the minimum failure-to-file penalty is the smaller of $135 ($100 for returns required to be filed before January 1, 2009) or 100% of the tax required to be shown on the
return.
Note:
If you feel a penalty or interest is assessed in error, you may refer to
Publication 1,
Your Rights as a Taxpayer.
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