The US Economy is not ideal. There are more crises than just Inflation, Climate Change, Energy Prices, Mortgage Rates, Housing Sales, and the Middle East. People have real trouble keeping up with paying Income Tax.
Take self-employed taxpayers, for example. They may well be accustomed to paying their income tax for 2022 with income they generated in 2023. But there was not a lot of business out there in 2023. Hence, what’s a struggling taxpayer to do? Turn to the IRS for help? Perhaps, well, Yes. The IRS has a multitude of methods that assist taxpayers who have fallen behind on their tax bills. Overdue Tax clouds individuals and businesses.
IRS solutions include Penalty Reduction and Abatement (my specialty), Installment Payment Plan Arrangements, which allow payment of income tax in monthly installments, and Offer In Compromise, which can reduce the total amount of income tax, penalties and interest owed. These choices have received a lot of press and 800-Telephone Number, Radio and TV commercials and are very recognizable. However, there are a few options not quite as familiar or common.
Novel solutions include one which “Suspends” the IRS from collecting from taxpayers while in a monetary crisis or until their financial condition changes. Bankruptcy can be a resolution to pay off or put off the IRS. Better yet, Income Tax Debt can go away “completely” after ten years for some lucky taxpayers that qualify. Paying the IRS in Installments over time, as long as seven years, can be costly as interest and penalties grow until the total balance is paid. One modern feature provided by the IRS includes paying Income Tax on a Credit Card! Credit card interest can be cheaper than continuing to pay interest and penalties to the IRS. Paying the IRS via credit card or utilizing a Home Equity Loan also stops taxpayers from receiving monthly notices from the IRS, which can be traumatizing and wreak havoc on emotional wellbeing. Care must be used in negotiating with the IRS on your own without the use of a professional. The payment options described can result in particularly negative outcomes. Some can modify your Credit Score, which influences many areas of your personal finance.
I have met many clients who bury their heads in the sand hoping IRS troubles will just go away on their own. I can assure you — this does not happen. IRS Correspondence turns nastier and nastier until the IRS can record a lien on your credit history or levy your wages and bank accounts. Taking a proactive approach is the best way to deal with IRS distress.
The Federal Government can be very helpful when taxpayers are in tough times. They want to work with taxpayers as you can see from the solutions described. Taxpayers complain they cannot reach the IRS or be placed on hold for hours and hours. It is much easier for professionals to contact the IRS. Unfortunately, this article is much too short to discuss IRS Tax Resolution Programs in detail. Visit the IRS website at IRS.Gov or contact me for more detailed information and requirements.
Just to let you know, this is the first article I have written for the Good Advice Section of Simply The Best Magazine in quite some time. Hopefully, it will be the first of many to come. Please let me know how I am doing. I would love to hear from you!
Robert A. Manela, CPA has been practicing in South Florida since 1986 and is the owner of Consulting CPAs, located in Boca Raton, Florida., specializing in 3T’s — Tax Planning, Tax Preparation and IRS Tax Controversy. He owns a related business, IRS Penalty Busters. Robert can be reached at 561- 867-1040, 561-867-1120 or 833-IRS-Bust (477-2878), via email at Robert.Manela@CPA.com, at www.ConsultingCPAs.com and www.IRSPenaltyBusters.com.
ROBERT A. MANELA, CPA
Consulting CPA, PLLC
5550 Glades Road, Suite 500
Boca Raton, Florida 33431
Tel: 561-867-1040 or 561-867-1120