Usually, there’s a reason people haven’t paid their taxes in full. One of those reasons can be that they don’t have the money.

Sounds reasonable, right?

Well, the IRS feels otherwise.

If you have a tax debt, they are fully authorized to collect it.

How to Know if You Owe (If You Don’t Already)

When you don’t pay your taxes on the date you owe them, the IRS will send you a notice. If you made a partial payment, you will receive a notice about your remaining balance.

This notice kicks off the collection process which continues until your debt is paid in full.

Of course, penalties and interest are compounding from the day the taxes were due. So it pays to handle this as quickly as possible.

Can’t Pay? Here are Your Options

Now, there are avenues to take if you can’t whip out the checkbook immediately to settle your tax debt right away.

Usually, it is best to have a tax professional such as an Enrolled Agent (EA) guide you through the maze of options. An EA can also look at prior tax returns to see if you paid too much tax in a previous year, which will help lower your tax debt.

Installment Agreement

You can pay the IRS over time with an accepted installment agreement. You should know that there are fees to pay and the IRS may not accept the agreement. The option is there, though, and has been used by taxpayers who can’t pay their debt all at once.

Offer in Compromise

Another route is an offer in compromise. This is an agreement by the IRS to settle your debt for less than you owe.

An offer in compromise can be tricky. Why?

First, there are eligibility requirements to meet. For example, if you are in the middle of a bankruptcy proceeding, you are not eligible.

Second, the IRS will not accept an offer in compromise if they feel they can collect the full amount from you in the time they have to collect. (The IRS has ten years to collect in most cases). If the IRS feels that the amount you are offering is the less than they can collect, it will be rejected.

Sound heartless? Their job is to collect tax, and they do it very well.

Third, there are also several forms to fill out and fees (as in more than one) to be paid.

Finally, your income and expenses will be put under the microscope. When it comes to the IRS accepting your offer in compromise, it’s not how much income you make. It’s how much you spend.

The IRS has living expense guidelines you must meet in order to have a chance at an offer in compromise. These guidelines are extensive. They lay out exactly how much you can pay for a mortgage and utilities, groceries and clothing, a car payment and more. Your actual expenses can be higher.

“In other words, the IRS cash flow analysis creates phantom cash flow – money the IRS thinks you should have to pay them, but you don’t,” explains Jeffrey Schneider, EA, CTRS, NTPI Fellow explains in his book Now What? I Got a Tax Notice from the IRS. Help!

Other Options

Other options include requesting “currently not collectible” status and full payment agreements.

Both of these avenues have their pitfalls.

With “currently not collectible” status, for example, penalties and interest still accrue. The IRS will review your financial situation periodically to determine if you can now pay your debt. If so, your status may be revoked.

Full payment agreements only give you 120 days to pay in full. This is helpful if you are liquidating an account or an investment and need time to get it done. Or, of course, you are counting on winning the lottery. Otherwise, it’s not the way to go.

Get Advice Before You Proceed

Don’t have the money to pay your debt? That’s ok, millions of Americans have been in your shoes.

There are roads you can take, but it pays to see an EA before you take the next step.

An EA will expertly navigate your situation. This allows you to get back into the good graces of the IRS… in the least painful way possible.

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Jeffrey Schneider, EA, CTRS, NTPI Fellow has the knowledge and expertise to help you reach a favorable outcome with the IRS. He is the head honcho at SFS Tax & Accounting Services as well as the Enrolled Agent and Certified Tax Resolution Specialist for SFS Tax Problem Solutions.
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Now What? I Got A Tax Notice From The IRS. Help! Defining and deconstructing the scary and confusing letters that land in your mailbox. Jeff defines and deconstructs the scary and confusing letters in a fashion that mixes attention to detail with humor and an intricate clarification of what is what in the world of the IRS.

The book is available in paperback and ebook on https://Amazon.com
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For more on SFS Tax Problem Solutions, visit: http://sfstaxproblemsolutions.com/
For more on SFS Tax & Accounting Services, visit http://sfstaxacct.com/
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738 Colorado Avenue Stuart, FL 34994
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Phone: 772-337-1040
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