The Internal Revenue Service (IRS) imposes tax rates based on the amount of income the taxpayer earns. When it comes to relief for tax penalties, what is available to the taxpayer is also dependent on a specific value—how much is owed. The first threshold for back taxes comes at around $50,000. For debts owed under this amount, with prompt action, there are several options available to resolve the issue. However, when the amount due exceeds this figure, things can get a little more complicated.
Payment Plan Options
Fortunately, a high balance with the IRS does not mean you will not have access to a payment plan. However, it does mean the terms of the agreement will be scrutinized. For example, the government may demand statements for your bank accounts, retirement accounts, investments, and any other financial accounts. They will not simply take your word. You need evidence to support that you cannot make a larger monthly payment than requested.
Non-Financial Consequences
With a high unpaid tax balance, the consequences can quickly move beyond the financial realm. If you owe over this threshold and you do not have an approved payment arrangement on file, the government can revoke your passport automatically. As a result, you will not be able to travel outside the country, even if it is a requirement for your job.
A Warning for Less Tolerance
It is a good idea to keep in mind that with a higher balance, the IRS may be less tolerant when it comes to a default on the payment agreement. With a lower balance, the IRS may offer some forgiveness if a taxpayer misses a payment or is late. However, if you have a higher bill, they may be less forgiving, and any default can cause the agreement to be terminated permanently.
Large Sum Payments Can Help
A good thing about the IRS threshold is that your amount due is always adjusted based on your current balance. For example, if you owed $55,000 in January but paid the balance down to $49,000 by April, you would no longer be considered a high balance taxpayer. If you are close to the threshold, consider making a lump sum payment that will get you under the threshold.
It does not matter if you owe less than or more than $50,000; negotiations for an unpaid tax bill can be complicated. Do not try to handle this battle on your own. Instead, contact a trusted professional in your area for IRS representation services.
