The middle class or working-class people around the world are concerned mainly about two things: their salary and the taxes they have to pay. Every month-end these two things are on top of their minds. Few of those who don’t pay their taxes on time or don’t pay at all assume that paying taxes is a waste of money and their respective governments are not doing enough for them.
Thanks to the internet, governments these days have become efficient and strict in terms of collecting taxes. They maintain an accurate database about their citizens and their tax payments.
If a citizen fails to clear taxes on time, governments warn them with tax notifications (via both regular mail and emails). Governments of few nations have also imposed an interest rate or a penalty for late taxpayers and tax evaders.
Internal Revenue Service (IRS)
IRS is a US government agency responsible for collecting taxes and enforcement of tax laws. It is sometimes called the “taxman” in the US and rightfully so.
Established in 1862, IRS is an organization that works under the United States Department of Treasury. It collects income and other taxes from US citizens and organizations in the US. Basically, any form of income is taxable.
For example: If an individual owns a piece of land or property from which he or she collects rent, then it is taxable. If an organization owns a building or has received a piece of land as a gift, then it is taxable.
In the US, citizens have to pay their income taxes manually. Unlike in India (TDS) or the UK PAYE(Pay-as-you-earn), taxes are not deducted before making payments (salaries, incentives, allowances, bonuses, etc).
Citizens of the US also have the option to pay their taxes online via the e-file option. In 2018, 89% of US citizens paid their taxes via the e-file system.
Until recently, the IRS has been penalizing late taxpayers and tax evaders by imposing month on month tax interests on them. If a citizen does not pay tax on any month beginning, he/she has to pay two months’ taxes plus the penalty interest rate for the month. If a citizen was evading taxes for more than six months, he or she was given life imprisonment.
Also Read: The TurboTax Giveaway Is Dead
IRS Fresh Start Program 2019
Realizing the citizens’ anger against penalizing over non-payment or late payment of tax, the IRS had recently come up with a program called the ‘IRS Fresh Start Program’ to encourage citizens to pay their taxes honestly.
The Fresh Start Program is an amendment or IRS’ tax collection procedures and policies. Formulated in 2008, the IRS underwent a few amendments in 2012 and has been highly productive since then.
Under this program, if a US citizen has been unemployed for over a month and has not paid taxes, penalty interest rates are not imposed on them. Those citizens can resume payment of taxes as when he or she finds a new job.
IRS has brought relief to US citizens and has been highly welcomed there. During 2018, around 141 million people in the US paid their taxes, which resulted in IRS collecting a whopping US $3.3 trillion in revenue. It also quite honestly, refunded US $282 billion in tax refunds!
The major tax payment plans that were amended under the IRS Fresh Start Program were Instalment Agreement and the Offer in Compromise plans.
What does the IRS Fresh Start program offer?
Under this program, people with high tax debts can choose to pay their tax debt in monthly installments rather than as a whole amount.
The amount to be paid each month can be negotiated with the IRS and citizens generally consult with lawyers to negotiate the amount to be paid; however, IRS is the deciding authority which fixes the amount that is paid each month. Citizens also consult with lawyers to check if they are eligible for the IRS’s Fresh Start Program.
There are many monthly payment methods under the IRS’s Fresh Start Program. They include: a streamlined installment agreement, partial-pay installment agreements, stair-step installment agreement, etc.
Generally, when proposing a monthly payment plan, citizens take into account their essential (minimal) monthly expenses. Citizens must also offer sizeable monthly payment of taxes for the IRS to approve their monthly payment plan.
Taxpayers subscribed for the monthly payment of their taxes must never default on their payment, even for a month. Otherwise, they’ll be imprisoned for life (14 years in jail).
Subscribing for monthly tax payment option does come with a fee, but this fee varies according to tax payment methods. One can choose to pay taxes online, pay via money order, pay via cheque, pay via credit or debit card or pay by calling the helpline number. Online payments or card payments have lesser subscription fees when compared to cheque payments or money order payments.
If a person with more than US $50,000 in tax debts, he or she must submit Form 433-F and Form 9465 to the IRS. Moreover, tax payments can only be made via cheques or money orders. Online payments or card payments do not apply to a person who has more than US $50,000 in tax debts.
Trust Fund Express Instalment Agreement
It is not only individuals but also small enterprises (startups) that default on tax payments. The IRS has a tax collection system in place for them too.
For startups that owe less than US $25,000 in tax debts, there is a tax collection system called Trust Fund Express installment. The startup must have at least 20 employees to qualify for that scheme. Under this plan, the startup can pay off its tax debts in 34 months. The amount to be paid each month can be negotiated with the IRS, but again it’s the deciding authority that fixes the monthly payment.
Like US citizens, US-based startups cannot default on monthly tax payments. If they do, monthly penalty interest rates will apply or the monthly payment agreement could be revoked altogether. If startups continue to default on monthly tax payments for long periods, they will be shut down and deemed illegal by the US government.
Although it sounds crazy but just like your salary, taxes are a source of income for any government. So please pay your taxes honestly to keep your government running smoothly and to avoid any tax penalties, whether you are an entrepreneur or a salaried worker.
Do not default on tax payments or have any black money because if you are imprisoned for that, it could ruin your career or future business prospects. No organization these days are willing to hire people with a criminal history nor are banks willing to lend money to people with a criminal history. Any organization does a thorough criminal background verification before hiring a person or lending money to him.
It is also challenging to evade taxes these days due to computer networking technology or the Internet that has developed. Governments maintain an accurate database about their citizens and their incomes and properties and can easily catch those people who have defaulted on their tax payments.
If you are a US citizen and have defaulted on tax payments before, this is a golden opportunity for you to make amends and wipe your slate clean. Keep your personal and professional records clean for a bright and shiny future (in business or employment).