If there is one thing most people don’t know much about, it is the complex inner workings of the tax world. Most of us do our best to file annual tax returns and pay whatever our accountant tells us we owe at the end of the process, but what happens when you can’t pay your tax debt immediately?
If you have received a certified letter in the mail from the IRS informing you that you owe an outstanding balance, don’t panic! This is a normal operating procedure. With a little assistance, you can avoid any major trouble with the IRS and resolve your tax debt in no time.
Review The Tax Return in Question
If you receive a letter from the IRS regarding a debt, it is important that you gather all the information possible, especially if you think there might be a mistake.
The first thing you should do when verifying your tax documents is to confirm that your basic personal information was put in correctly. Check your name, social security number, address, and other contact information for accuracy.
After you have confirmed that all personal information is correct, you should check that all sources of income have been reported and you have claimed all relevant deductions and credits. You should also review your tax returns for any math errors, typos, or other mistakes. Tax forms can be long and tedious documents with countless places for errors. If you find an error in your tax documents, it is crucial that you report it to the IRS immediately to rectify the issue.
Get All The Paperwork in Order
Before you meet with the IRS or absolve your debt, make sure that you have all your paperwork in order. This is especially important if you are being audited or are under investigation. You should always go into meetings and interactions with the IRS fully prepared with all tax documents and supporting forms, receipts, and reports. Having this organized and annotated beforehand can help make the process go that much smoother.
Consult an Expert
Tax resolution attorneys like Steven Klitzner have gone through years of extensive training and education on tax law and representation. When you find yourself in debt with the IRS a tax attorney can communicate with the IRS on your behalf and negotiate a payment plan or settlement for your tax debt. If you are facing an IRS audit, a tax attorney can help you prepare for the audit, represent you during the audit, and appeal any adverse decisions.
They can also help you apply for an Offer in Compromise, which is an agreement with the IRS to settle your tax debt for less than the full amount owed.
Should your case lead to legal action being taken against you and your family, a tax attorney can represent you in court as well. if the IRS has initiated a lawsuit against you, such as a tax lien, wage garnishment, or bank levy.
In general, a tax attorney can help you navigate the complex world of tax law and negotiate with the IRS to find a resolution to your tax debt. It’s important to work with a reputable and experienced tax attorney who can provide personalized advice and representation based on your specific situation.
Payment Options
IRS debt can be complicated because you can owe anywhere from $20 to tens of thousands of dollars. If you do not pay these debts, regardless of the amount, immediately, you may open yourself up to endless fines and late fees. In some cases, you can be charged daily late fees which may be a set dollar amount of a percentage of the full amount owed. If you have found yourself in major debt, a 5% compounding late fee can increase your overall debt in a major way.
Luckily, there are a few options to help you get back in compliance without facing wage garnishment, bank levies, or even jail time.
Settlement
A tax settlement is an agreement between a taxpayer and the IRS to settle a tax debt for less than the full amount owed. Under a tax settlement, the taxpayer agrees to pay a reduced amount of the tax debt in exchange for the IRS forgiving the remaining debt.
To qualify for a tax settlement, the taxpayer must meet certain eligibility requirements and submit a formal application to the IRS. The IRS reviews the taxpayer’s application and may request additional information or documentation before making a decision. If the IRS accepts the taxpayer’s settlement offer, the taxpayer must agree to comply with all tax laws and pay the agreed-upon amount on time.
It’s important to note that not all taxpayers are eligible for a tax settlement, and even if a taxpayer is eligible, there is no guarantee that the IRS will accept the settlement offer. It is best to work with a reputable tax professional, such as a tax resolution attorney, to determine if a tax settlement is a viable option and to assist with the application process.
Offer in Compromise
A tax settlement and an Offer in Compromise (OIC) are two terms that are often used interchangeably to refer to the same thing. Both a tax settlement and an OIC involve negotiating with the IRS to settle a tax debt for less than the full amount owed.
However, an OIC is a specific type of tax settlement that involves submitting a formal application to the IRS to settle a tax debt for less than the full amount owed. An OIC requires the taxpayer to provide detailed financial information and supporting documentation to demonstrate that paying the full amount of the tax debt would create an economic hardship.
The IRS will consider an OIC if it determines that the taxpayer cannot pay the full amount of the tax debt and that accepting the OIC would be in the best interest of both the taxpayer and the government. This is common with business owners who have taken substantial losses in recent years or individual taxpayers who have filed bankruptcy. If the IRS accepts the OIC, the taxpayer must agree to comply with all tax laws and pay the agreed-upon amount on time.
Payment Plan
A tax payment plan, also known as an installment agreement, is a payment plan that allows taxpayers to pay their tax debt over time in regular, manageable installments. Under a tax payment plan, the taxpayer agrees to make monthly payments to the IRS until the tax debt is fully paid. The amount of each monthly payment is based on the total amount owed, the taxpayer’s ability to pay, and the length of the payment plan.
To qualify for a tax payment plan, the taxpayer must owe less than $50,000 in tax debt, including interest and penalties, and be current on all tax filings. The taxpayer must also agree to comply with all tax laws and pay the full amount owed, including interest and penalties, by the end of the payment plan.
There are several ways that a person can apply for a tax payment plan online, by phone, or by completing Form 9465, Installment Agreement Request, and mailing it to the IRS. The IRS will review the person’s application and may request additional information or documentation before making a decision. It is important to note that interest and penalties will continue to accrue on the tax debt until it is fully paid, even if you are on a payment plan.
Paying Outright
If your tax debt is an amount that you can feasibly pay outright, that is the best option in most cases. You can pay a tax debt off via electronic funds transfer, debit or credit card, check, money order, or even cash.
Paying your tax debt in full can provide you with numerous benefits, including avoiding interest and penalties, maintaining good credit, avoiding enforcement actions, and providing peace of mind. For more details on how to make payments directly to the IRS, visit their website.
Law Office of Steven Klitzner
As the tax season quickly draws to a close, you are more and more likely to see issues with previous years tax returns come up and to be presented with your total tax debt. If this is the case, you should see a professional tax relief attorney to ensure you get the best deal possible.
Owing money to the IRS can be scary, but tax resolution lawyers have the experience in dealing with the IRS that regular taxpayers do not get. Attorneys like Steven Klitzner are there to help you navigate the fog of policies and paperwork in the most efficient and effective way possible.
If you live in Miami or the surrounding area, call The Law Office of Steven Klitzner today at (786) 977-2924 to set up your free consultation and get that much closer to IRS compliance!
Steven N. Klitzner, P.A. is a tax attorney based in Miami, Florida. He has been practicing tax law for over 40 years, and currently holds a 10.0 rating by Avvo. Mr. Klitzner was appointed to the IRS Service Advisory Council in 2021 and is... 
