Need tax relief help? This is a guide for taxpayers who are looking for resolve their IRS tax debt and owe less than $100,000.
The IRS collections process: automated notices
The IRS creates an account receivable when a taxpayer incurs tax debt.
In order to collect from the taxpayer, the IRS then follows a series of steps.
The first step involves a series of computer-generated notices that are sent to the taxpayer. The taxpayer may contact the IRS at any time to make arrangements for the debt.
The first notice is a CP 14 Notice, which will look like this:
After the CP 14 Notice, the IRS automated system will continue to send notices every five weeks. The next notices will be a CP 501 notice, followed by a CP 503, and finally a CP 504.
If the taxes are not resolved during this initial phase, the case will be transferred to the Automated Collections System (ACS) or to a field revenue officer.
ACS works with taxpayers over the phone. Revenue officers will visit the taxpayer’s home or place of work.
If you owe payroll taxes, or owe over $250,000, the case will be transferred to a revenue officer. Otherwise, you will deal with ACS.
The IRS collections process: ACS enforcement
If the taxes remain unpaid after the automated notices, ACS will send a final Notice of Intent to Levy.
The final notice of intent to levy is very important. It the final notice required for the IRS to levy assets; they do cannot do so legally before this notice.
The CP 504 notice looks like a final notice of intent to levy, but it is not. The final notice will be either a Letter 1058 or LT11 and will look like the below.
Letter 1058:
LT11:
If you receive either of these two notices, you or your representative need to contact the IRS within 30 days to make arrangements or to request a collections due process hearing.
After the 30 days to respond have lapsed, the IRS can levy your wages, self-employment income, and bank accounts. So it is important to not ignore this notice!
IRS Tax Debt Relief Programs
In order to qualify for a collection alternative, the IRS will require to be current with your taxes. This means that:
- You’ve filed all of your tax returns that are due
- If you’re required to make estimated tax payments, you’ve made them for the current period.
If you’re current with your taxes, then you can request tax relief help (i.e., collections alternatives). There are several options available.
Guaranteed and Streamlined Installment Agreements
The IRS offers three types of streamlined Payment plans:
- Guaranteed Installment Agreements (GIA): 36-month payment terms for balances of $10,000 or less.
- Streamlined Installment Agreements (SLIA): 72-month payment terms for balances of $50,000 or less.
- Streamlined Processing for Balances Between $50,000-$100,000: 84-month payment terms for balances between $50,000 and $100,000.
To apply for one of the options above:
- Do it online. If you owe less than $50,000, you can request a payment plan online at https://www.irs.gov/payments/online-payment-agreement-application
- By mail. If you owe less than $50,000, you can fill out Form 9465 and send it to the IRS.
- Over the phone. If you owe less than $250,000 you can set up a payment plan over the phone at: 800-829-1040 (individuals) or 800-829-4933 (businesses). If your debt is less than $100,000, you will not need to provide verification of your assets, expenses, debts, or income.
Partial Payment Installment Agreement
If because of your financial situation you’re not able to make the payments, you can request a partial payment installment agreement (PPIA).
In order for the IRS to consider a PPIA, they will request financial information over the phone to determine if you qualify.
Currently not Collectible
If you’re not able to make any payments, the IRS will consider placing your account in currently not collectible (CNC). The IRS will place taxpayers into CNC status when their monthly allowable living expenses exceed their monthly income.
This is commonly used when a taxpayer temporarily unemployed. A CNC status is not permanent. When your financial situation changes, the IRS will reach back out to get you on a payment plan.
Offer in Compromise
In some cases the IRS will settle your tax debt through an Offer in Compromise (OICs). The IRS wants to get the most it can in a reasonable amount of time, and if that means settling the debt they will.
Most taxpayers are not good candidates for an offer in compromise. It is recommended that you work with a tax debt relief attorney if you want to explore an offer in compromise.
Staying out of trouble after you’ve resolved your tax debt
If the IRS agrees to one of the tax relief programs discussed above, they will require you to remain in compliance going forward.
That means you must timely file your tax returns and must pay all new taxes as they are due. You should look into making estimated tax payments and/or adjusting your W-4 so you don’t continue to owe taxes every year!
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