IRS tax problems can be overwhelming and confusing. It’s always a pleasure to me to appear on radio shows and give free tax advice to regular taxpayers who may not be able to afford a tax lawyer.
Recently I sat down with Drew on the Money, Riches, and Wealth Radio Show to answer some questions average taxpayers had regarding back taxes and resolving IRS tax debt with or without the help of a professional tax lawyer:
Resolving to Pay Back Taxes
David: I have some back taxes and it’s not a whole lot of money-it’s $4,000 for one year and a couple of thousand dollars for another year. I was wondering if there’s something to work out with the IRS to push all of this together to next year?
Michael: The IRS does not take individual taxpayer’s financial schedule into consideration. For any back taxes under $10,000, you can pick up the phone and give the IRS a quick call and they’ll set you up on a small monthly payment plan for $100-$115/month. Use the 800 number on the notice you received. You will not have to fully disclose your financial information (where you work, how much is in your bank…etc.) to be able to be set up with a reasonable payment plan.
Waiving IRS Penalties For Hospitalization
Luigi: Last year, I was hospitalized in Kosovo Medical Center and I did not receive the 1099 for $5,000 because I was not home. So naturally I didn’t file because I didn’t receive it. Now the IRS sends me a notice saying that I owe $1800 dollars and I guess they overpaid me on a return for what I owed. But now I don’t have the money to give back to them. Would the IRS make a deal to make it less money? And for the refunds that I’m filing for this year–since I owe the IRS money, would they take what I owe out of the refund they send me?
Michael: The IRS probably won’t make a deal on the principal, but you may be able to get the penalties waived if you tell them that you were hospitalized and if you show them documentation to prove it—that would work. But like David (above), you may just want to give the IRS a call and get on a $25-$30/month payment plan till it’s paid.
As for the refund, the IRS will definitely take whatever amount you owe them out of the refund check you will receive this year. However, the fact that your refund may “pay off” your IRS debt does not mean the IRS will not continue to make aggressive collections efforts in the meanwhile. The IRS will not be waiting for you to file a return for them to take the money out—you will be penalized and hunted until you provide them documentation of your hospitalization and until you set up a payment plan.
Applying & Qualifying for Offer in Compromise
Larry: I owe around $20,000 to the IRS and I contacted them to find out that they will settle for less than what’s owed. What’s the procedure here and is it likely that I will be able to get a break?
Michael: You’re talking about the Offer in Compromise program, which is the closest thing to amnesty that the government offers. And they are taking more offers nowadays because of the economic meltdown and the real estate bubble bursting. But you will need professional tax help—it’s a formulated process, they look at your assets, liabilities, income, and whether you own any real estate–essentially a full financial disclosure.
The formula allows them to see whether you qualify for the offer, because the IRS doesn’t want to decrease what you owe if you have hundreds of thousands of dollars in your bank account. They want to make sure you’re the right fit for the program.
More Tax Help, IRS News and Tax Relief Tips:
- Retire Your IRS Back Taxes Forever: How Tax Resolution Services Helped Save a Taxpayer $130,000
- IRS Tax Relief: Seven Common Income Tax Relief Myths That Can Get You into IRS Trouble
- Avoid IRS Tax Penalties By Establishing “Reasonable Cause” For Failing to File and Pay Your Taxes
- Tax Help For Taxpayers Short on Cash: Filing a Tax Return Late is Better than Filing a False Tax Return
- Don’t Settle for a Busy Signal if You Need Tax Help: IRS Can Only Service 70% of Taxpayer Phone Calls