After a COVID-related pause in collections and enforcement, beginning June of 2021, the IRS has been sending out collection letters to individuals with overdue taxes. By now, many have gotten these letters. While the IRS will undoubtedly tell you to pay up now or face the consequences, you likely have more options than you know about, regardless of how little or how much you owe.
What to Do If You Get an IRS Collection Letter
Have you gotten a threatening letter from the IRS saying you have back taxes due immediately? There are things to know and steps to take ASAP about overdue taxes:
Don’t wait – You’re already being charged interest and fees based on the rate of delinquency and the amount due. Contact the IRS soon to avoid additional fines or interest, especially to avoid levies or liens.
The tax filing deadline is when taxes are due – Many don’t understand that the amount due is supposed to be paid by that deadline when they file their taxes. Extensions are good for giving you more time, not only to file but to pay money owed to the IRS without penalty. Anything unpaid by the deadline or by an additional extension is in growing default, accruing interest, even if the IRS has not contacted you. Recheck your previously filed taxes to be sure.
Payment plans are available – Even though your IRS letter demands full payment made by a looming date, the IRS is always capable and willing to arrange payment plans, and everyone qualifies for at least one of them. Payment plans include payment-in-full, short-term of 120 or fewer days, or long-term monthly payments laid out with a final payment date and installment agreement.
Application – If you owe less than $5,000 in back taxes, you should apply online immediately for a payment plan with the IRS. Have ready: your email address, address from the most recent return, filing status, social security number, balance due amount, a previous transcript, and IP PIN (if you have them). Log in with your same IRS ID and password. If you don’t already have an online IRS account, be ready to further prove your identity with a bank account number or cell phone number in your name or an activation code sent to you via USPS.
Application costs – If you can pay the full sum or do a short-term plan, there is no setup fee. For the installment (long-term) plan done by direct debit, there is a $31 setup fee, which is waived for qualifying low-income payers. Non-direct debit monthly payments require a $43 setup fee. If you pay the outstanding amount now, you can avoid future interest or other fees. For the short- and long-term payment plans, you will pay all interest and fees accrued until the full balance is paid.
The Offer in Compromise (OIC) program – Those who qualify for the OIC program need to prove they don’t have the means to pay off their tax debt, even with a payment plan, and still support their day-to-day family expenses. This IRS debt forgiveness program allows for special hardship cases to get a fresh start.
Other options – The IRS has some other options that include abatement or adjustment of penalties, interest, and designating debt as “uncollectible."
Professional Tax Help When You Need It Most
Myrick CPA provides guidance regarding how to approach the IRS, including what documentation you will need to show them. For individuals who owe at least $5,000 or have more than $10,000 in back tax liability, we offer special Tax Resolution Services. We deal directly with the IRS for you, working toward your best settlement and payment plan.
Don’t wait another day to schedule your free tax resolution consultation. If you are concerned about your tax obligations, don't ignore the situation or spend time worrying about it. Instead, consult the tax professionals at Myrick CPA; you may be pleasantly surprised that you may have more options than you expected.