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Getting a tax notice from the IRS is not a matter to take lightly. If you cannot pay in full, you should send in as much as you can with the notice. The unpaid balance is subject to interest compounded daily and a monthly late payment penalty. It is in your best interest to pay your tax liability in full as soon as you can to minimize additional charges. You also might want to consider a obtaining a cash advance on your credit card or a bank loan. The interest rate your credit card or bank charges and any applicable fees may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. Paying off your tax debt by using a credit card, obtaining a cash advance or a bank loan may also keep your tax debt from negatively affecting your credit rating.
If you are unable to pay your balance in full, the IRS may be able to offer you a monthly installment agreement. If you are experiencing a financial hardship and are unable to pay anything, the IRS may temporarily suspend collection action. Interest and late payment penalties will continue to accrue while you make installment payments or while collection is suspended. If you are a member of the Armed Forces, you may be able to defer payment.
Once all payment options have been considered and it is determined that you do not qualify for an installment agreement, you may choose to propose an Offer in Compromise (OIC). It is an agreement between a taxpayer and the IRS that resolves the taxpayer’s tax liability by payment of a reduced amount.
It is important to contact the IRS and make arrangements to pay the tax due voluntarily. If you do not, the IRS may take action to secure payment.
Some of the actions the IRS may take to collect taxes include:
1. Filing a Notice of Federal Tax Lien,
2. Serving a Notice of Levy; or
3. Offsetting a refund to which you are entitled.
An explanation of this process is as follows:
The federal tax lien is a claim against your property, including property that you acquire after the lien arises. The lien arises when you fail to pay the taxes you owe within 10 days after we send our first bill. By filing a Notice of Federal Tax Lien, the government establishes its interest in your property as a creditor in competition with other creditors in certain situations, such as bankruptcy proceedings or sales of real estate. The filing of a Notice of Federal Tax Lien may appear on your credit report and may harm your credit rating. Once a lien arises, the IRS generally cannot issue a “Certificate of Release of Federal Tax Lien” until the taxes, penalties, interest, and recording fees are paid in full or the IRS may no longer legally collect the tax.
A Notice of Levy is another method the IRS may use to collect taxes. Levying means that they can confiscate and sell property to satisfy a tax debt. This property could include your car, boat, or real estate. The IRS may also levy assets such as your wages, bank accounts, Social Security benefits, and retirement income. In addition, we will apply future federal tax refunds that you are due, to offset the amount you owe. Any state income tax refunds you are owed may also be applied to your liability.
You have rights and protections throughout the collection process. Let Greenwald & Company, P.C., CPAs help walk you through this process. This process can cause a lot of stress, can be very confusing and often times scary so please let a professional help guide you through it.
You can call us at 770-956-1717 or fill out the form below.
