There are times when the IRS intimidates taxpayers and they are so fearful, they will pay a notice without verifying the accuracy. The IRS may not have all the facts, so do not pay anything without checking the details. However on the flip side, I have seen taxpayers ignore letters and make the situation much worse. Dealing with the IRS can be stressful. Owing the tax can be what keeps taxpayers awake at night. Keep in mind, there ARE solutions! If you owe the IRS money, here are a few options I would like to share with you.
1. Pay them what you can each month and be consistent!
2. Set up a payment plan with the IRS:
a. They charge a one-time fee of $105 if you pay by check in doing
so, $52 if you allow them to do a direct debit.
b. Interest and penalties still accrue (Interest right now is 3% daily
and penalties are .5% on the tax).
c. If it is less than $50k, you have 6 years to pay it off.
d. No financials or bank statements required to submit for approval.
3. Offer in Compromise:
- Pay less than you owe. Depends on:
i. Value of current assets (house, rentals, boats, vehicles, retirement accounts)
ii. Amount of discretionary income
iii. Ability to pay future income looking at health issues and number of years left to generate income, passive income opportunities - Must submit financial statements, bank statements and proof of expenses for approval
- Once the offer is accepted, interest and penalties are no longer accrued
- Typically will take from 6-8 months or more to go through the process
- There are several options in payment, but usually the agreed amount is paid soon after the offer is approved in either a lump sum or payments.
Here are some typical situations where Admin Books can assist with an offer:
Scenario A:
A married couple aged 35 and 38. The wife has a baby and quits working. They rent and have no assets. They owed $45,000, but the IRS settled on a lump sum payment of $4,000.
Scenario B:
An 85 year-old single woman owns a home and a commercial building. The IRS wanted to take the commercial building to pay for taxes from the last 25 years that they say totalled $1.5 million. The taxpayer sold her personal residence, paid the IRS $85,000 and kept the commercial building.
Scenario C:
A 58 year-old single man cashed out $100,000 of his retirement to purchase a property. He put the property in a friend’s name. There was a falling out with the friend which lead into the man legally not owning the property, and owing the IRS taxes for the withdrawal of the funds plus the early distribution taxes. The IRS assessed interest and penalties in addition to the taxes owed, but settled on only $39k of taxes.
Don’t get yourself in a situation where the IRS deducts money from your bank account. Communication is the key. Have someone on your side to fight for you. Call your tax representative for sound advice!
