If you owe less than $25,000 to the IRS, you maybe can handle this without outside help. There. I said it.
IRS has established a simplified collection process for relatively small tax liabilities. In other words, for back taxes up $25,000, there is a do-it-yourself process to help you create an installment agreement with IRS.
By now, surely you’ve heard someone selling the “IRS Fresh Start Initiative”. Forget about the radio ads and the internet pop-up pages. Those companies want you to pay for something insanely simple… and free.
Here’s how it works
- Call IRS Collections at 800-829-3903
- Follow the voice prompt and provide your SSN or Tax ID
- Ask the representative for a Direct Debit Installment Agreement
- Provide the information requested (Name, address, employment, banking info)
- Tell the representative the minimum monthly payment you can afford (Hint: Your minimum payment should be at least the Total Liability divided by 72.)
- Agree to pay by payroll deduction, or a monthly draft from your bank account.
- Agree to the minimal processing fee
- IRS will mail your documents to confirm the agreement.
Done. Like I said, you can do-it-yourself, if your situation is simple. In some cases, the process is similar for up to $50,000 of tax.
However, for some people, the situation is more complex. For those with layers of other legal issues, I suggest you be more cautious. For those with complications, the simplified process is not for you.
Here are a few examples of those “complications”.
- Your liability exceeds $100,000.
- All of your tax returns are not yet filed.
- Your business is struggling, and meeting payroll is a problem.
- The government has already filed a lien, or has taken money from you.
- You believe your amount of tax debt is incorrect.
- Your business is under audit or investigation.
- You are facing divorce, bankruptcy, foreclosure, etc.
- You have business partners.
- You have income limitations (ie: illness, business shutdown, seasonal work, etc.)
Remember, you are required to provide information to the government. Without the buffer of a tax defense attorney, your communication with IRS could hurt your situation. The Internal Revenue Service could even begin collection enforcement (ie. Tax levy) without even granting you a payment plan.
So let’s recap: For an IRS Installment Agreement:
- If your situation is simple, you have a monthly income, and owe $25,000 or less, call IRS and do-it-yourself
- If you owe more ($25,000 – $50,000), ask your tax prepared whether the simplified process is available.
- If you owe greater than $50,000, or if you have other legal issues to consider (see above), then only work through an experienced tax defense attorney. It matters.