Twice every year, the California Franchise Tax Board publishes a list of the 500 state residents who owe the greatest amount in income taxes. The state Board of Equalization has a parallel list, published every quarter, which tracks debts owed on sales and other taxes.
When summertime is in full swing in Southern California, taxes may be the furthest thing from many residents' minds. But for those who owe money to the Internal Revenue Service, taxes can become a year-round preoccupation. Since penalties and interest on tax debts can quickly swell the total amount owed, it is important to reduce and eliminate one's debts as quickly as possible.
Two weeks ago, we noted the legislation proposed by U.S. Senators Bob Casey and Charles Schumer designed to address the increasing number of Americans who are renouncing their citizenship. That bill would increase the penalties on those whom the Internal Revenue Service deems to have given up their passports to engage in tax evasion.
For some California taxpayers with burdensome tax debts, an offer in compromise, commonly abbreviated OIC, can provide relief. Under an OIC, the Internal Revenue Service agrees to accept less than the full amount of a person's tax liability in satisfaction of the debt. Many taxpayers are discovering that the relief provided by an OIC is slow in coming, however, according to a Treasury Inspector General for Tax Administration report.
The calendar has already turned to April, and the deadline for filing your tax return for 2011 is fast approaching. While some may have already filed and received a refund, others may be delaying filing because they will owe money with their return. Some may even be in a position where they cannot afford to pay all of their tax debt with their return.
In our last post, we discussed how some California taxpayers can benefit from a six-month extension to pay taxes this year. But some taxpayers have large debts to the IRS that may take them a significant amount of time to pay off. There are other options that can help these taxpayers, such as installment agreements and offers in compromise. Under the Fresh Start program, the IRS has also announced changes to these options with the goal of helping struggling taxpayers.