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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29655
Experience:  Taxes, Immigration, Labor Relations
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I am just now filing my 2011 Federal income tax return. Since

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I am just now filing my 2011 Federal income tax return. Since my husband died it has been difficult for me to figure things out because he had ALL withholdings done with his paycheck. I had no with holding of income tax from my pension, social security disability (I am disabled and retired) and ultimately the pension for spouses from my husband's union.

So the problem being, since he died in April of 2011 there were NO MORE WITHHOLDINGS. Consequently, I have discovered a huge income tax liability for 2011 (nearly $5,000 for Federal and $2,000 for State). I don't have that kind of money available to me since I used my savings to pay the tax liability for 2012, although it was late.

I will need to ask for a PAYMENT PLAN for my 2011 tax liability. Can you tell me how to do it and what I need to ENSURE they will allow it? Also, what happens if they deny me a payment plan? :\

Lev :

Hi and welcome to our site!
The first step would be - to prepare your tax returns - and determine your actual tax liability - it might be less than the IRS determined - in this case - you may simply file your tax returns - and your tax liability (and corresponding penalties and interest charges) could be reduced substantially.
To prevent the IRS from garnishing your wages - generally - you need to establish payment plan. This agreement would allow you to pay your full debt in smaller, more manageable amounts. Installment agreements generally require equal monthly payments. The amount of your installment payments and the number you make will be based on the amount you owe and your ability to pay that amount within the time the IRS can legally collect payment from you. You will find more information and references to forms on this page - http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Fresh-Start-Installment-Agreements

Lev :

In order your your installment agreement to be accepted - the maximum term should be not more than 72 months. Before you apply:



  • child">File all required tax returns;

  • Consider other sources (loan or credit card) to pay your tax debt in full to save money;

  • Determine the largest monthly payment you can make ($25 minimum); and

  • Know that your future refunds will be applied to your tax debt until it is paid in full.


Fees for setting up an installment agreement:



  • $52 for a direct debit agreement;

  • $105 for a standard agreement or payroll deduction agreement; or

  • $43 if your income is below a certain level.



If you are not comfortable using online application - Complete and mail Form 9465, Installment Agreement Request


 

Lev :

If you will not be able to reach any agreement with the IRS - your income and assets might be garnished to satisfy the tax debt. So - you better to avoid such situation.

Customer:

Within the link you provided it says:


The Streamlined Installment Agreement criteria is divided into two categories, balance due of $25,000 or less, and balance due $25,001 to $50,000.


The criteria to qualify for streamlined installment agreements with a balance due of $25,000 or less are:



  • You owe $25,000 or less, at the time the agreement is established. If you owe more than $25,000, you may pay down the liability before entering into the agreement in order to qualify.

  • The debt must be full paid within 72-months or prior to the Collection Statute Expiration Date, whichever is earlier.

  • You must be compliant with all filing and payment requirements.

  • Individuals who owe any type of tax (Form 1040, Trust Fund Recovery Penalty, etc.).

  • Defunct businesses, including any type of entity and any type tax (Form 940, 941, 943, etc.).

  • Operating businesses are limited to income tax liabilities only (Form 1120).

Customer:

Noting the 2 things I highlighted - What is the Collection Statute Expiration Date? and How do I know if I'm compliant with all filing and payment requirements? Will you please answer these clarification questions? Thank you

Lev :

the Collection Statute Expiration Date is ten years after the tax liability is assessed. So if you have the tax liability only from 2011 - and do not have any earlier tax liability - that should not be your concern. What you need in connection with this item - file your 2011 and 2012 tax return - so your tax liability is clearly identified.

Customer:

Do you know if this applies to state tax returns also? I live in Minnesota.

Lev :

In general - yes - but you need to apply for state installment agreement separately.

Customer:

Thank you so very much, you've been a great help. God bless you!!!

Lev :

Here is the publication which might be helpful - http://www.revenue.state.mn.us/collections/factsheets/Installment_Payment_Plans.pdf

Lev :

You have the option of setting up a payment agreement online using the department’s payment agreement system.

Customer:

Thank you for that link. It looks like it presupposes I have filed the return already, which I have not. So do I file my state return with no payment at this time? I'm confused, I'm sorry.

Lev :

Yes - all tax returns must be filed before you start application for installment agreement.
You need to know the exact amount of your tax liability - that you do not know if you have not file tax returns.

Customer:

ok thank you.

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