How can I get help with back taxes?

Florida residents who owe federal income tax but do not have the money to pay should understand that they do have options.

Florida residents, like their counterparts around the country, can often find paying taxes a challenge. This may be because they do not feel that their tax burden is fair but it may also be because they simply cannot pay the taxes that they owe.

Knowing that money is owed to the Internal Revenue Service can weigh heavily on people. Just what can someone in this situation do if they lack the funds to make the appropriate payment? There are options given by the IRS and knowing these is important. One is an offer in compromise and the other is an installment agreement.

Understanding the offer in compromise

As the name implies, an offer in compromise is your offer to the Internal Revenue Service to compromise on your taxes. You essentially put together a proposal for paying a total amount less than what you actually owe and send it to the IRS.

You may generally want to include an initial payment with your offer. This may be a 20 percent down payment with a promise to pay the remaining amount in less than six subsequent payments. You may also send in a smaller amount with a proposed payment plan that includes more than five subsequent payments.

The IRS indicates that it is most likely to accept an offer in compromise if it does not believe that it has the ability to collect more than the offer in a reasonable manner. It is not wise to low-ball the IRS with these offers and investigating other options may be wise before pursuing an offer in compromise.

Understanding the installment agreement plan

The Internal Revenue Service does allow people to set up payment plans in order to satisfy their tax debts. This can be done online, via mail or perhaps even by speaking with an IRS agent. People should know that during the life of such a plan, penalties and interest do amass on an account which does increase the amount paid in the end. But, a plan is a way of avoiding collection activities.

U.S. News and World Report recommends that when requesting a plan, people set up their payments for an amount lower than they think they can actually pay. Then they can make payments greater than promised and complete their plans faster.

Individuals are only eligible for these plans if their total tax bill including penalties and interest is no more than $50,000. Any future refunds that a person may receive will be automatically credited to an account with a payment plan.

Other important information

Whether someone wants to initiate an offer in compromise or an installment agreement plan, a tax return must always be filed. MarketWatch indicates that failure to file a return on time can add even more penalties to a person's debt.

Tax problems can grow quickly when not properly addressed. It is always recommended that Florida residents talk with an experienced tax lawyer about how to best handle tax debt that is not able to be paid.