As I represent taxpayers in Washington, DC and the wider DMV area who have IRS or State tax issues, I have noticed that most people who receive any of the following notices from the IRS are puzzled about their options:
- Notice of Deficiency (IRS Letter 531)
- Notice of Intent to Levy and Notice of Your Right to a Hearing (IRS Letter 11)
- Final Notice (IRS Letter 1058)
If you have received a 531, LT11, or 1058 notice from the IRS, you are essentially deemed to be in active IRS collection. Going forward, the IRS can seize your property, savings, or wages, and it can have your passport revoked. Still, the IRS is willing to work with tax payers towards tax resolution.
You can navigate the IRS collection process with greater ease by thinking of it as a series of three steps: Compliance, Communication, and Collection Alternative.
Tax Compliance: The chief step in resolving your tax issue with the IRS is to get into “tax compliance”. This means that you have filed all your tax returns for the last 6 years. If you have a gap in filing, you should have your unfiled tax returns prepared urgently.
Compliance also means that you have made your current-year tax payments either through your employer’s withholding (W-2 wage income); through making estimated tax payments (if self-employed); or through depositing current-quarter payroll taxes (if a business/non-profit entity).
Communication: After preparing your missing tax returns, quickly get in touch with the IRS to submit those returns and to pay your current year taxes. You may still owe prior-year taxes, penalties, and interest. For these, you can propose to the IRS a tax payment option (a Collection Alternative).
Collection Alternatives: There are three main collection alternatives for resolving tax debt: Offer-in-Compromise, Uncollectible Status, and Installment Agreement.
An Offer-in-Compromise is a negotiated agreement in which the IRS agrees to accept less than the total amount you owe, while you agree to both (1) pay the negotiated amount, and, (2) maintain tax compliance for the next five years. The acceptability of your offer relies on a formula called Reasonable Collection Potential (RCP), which is the net equity in your assets plus your excess future income over the next 12 or 24 months. Some significant planning can go into helping you maximize your Offer’s acceptance.
Uncollectible Status is temporary relief that applies when the IRS determines that you are unable to make current tax payments. If you are deemed uncollectable, the IRS may still file a tax lien to secure its claim to your assets or income, and it will continue to charge interest on the amount you owe. But the IRS will not act to seize or levy your assets or income.
An Installment Agreement is a payment plan in which you agree to pay your taxes over a time period. There are three variations of the Installment Agreement: Regular, Streamlined, and Partial-Pay. The type of agreement that works best for you will depend on your personal circumstances.
If you have (or someone you know has) received a 531, LT11, or 1058 notice from the IRS and cannot pay the tax owed, please feel free to contact me by phone (1-877-632-6829) or email at akyele@archersolutions.biz.
Abraham Kyele King’oo, EA, MBA
6400 Georgia Avenue NW, Suite 11
Washington, DC 20012
Tel. 1-877-632-6829
www.archersolutions.biz
Comments(0)