A letter from the IRS is rarely a good thing. One of the worst missives to get from the IRS is the CP90 – Final Notice Before Levy. It is a final warning shot to scare you into paying up and should not be ignored.
After an IRS final notice, you could:
- Pay in full – but if you could afford to do that, you probably already would have done so.
- Sign on for an installment agreement on your own, with penalties and interest so excessive it will never end.
- Ignore them and wait for terrible consequences like garnished wages and tax liens. Don’t do this, ever.
- Contact your tax resolution professional to see what your resolution options are.
The CP90 intends to intimidate you into calling so the IRS can take as much as possible from you even if it leaves you in dire financial straits, unable to pay your bills or support your family.
A better option is to work with a certified tax resolution expert that can negotiate on your behalf for better results. A tax expert can pursue resolutions that would be difficult (if not impossible) to negotiate on your own. Below is a look at four options to deal with tax debt.
Number 1: Offer in Compromise (OIC)
An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles a taxpayer’s tax liabilities for less than the full amount owed. It can be far more reasonable than an IRS installment agreement, but you have to see if you qualify based on your unique financial situation and specific case. The OIC is not like wheeling and dealing at a used car lot. Don’t fall for those ads that say they can settle for ‘pennies on the dollar.’
It takes a full financial evaluation and an experienced professional to determine if you may qualify.
Number 2: Installment Agreement (IA) or Partial Payment Installment Agreement (PPIA)
These are well-structured installment agreements that can potentially slash penalties by 50%, depending on the circumstances. The IA is an agreement to pay what’s owed in full while a PPIA lets you pay a reduced amount. These agreements generally run 6-72 months,
Number 3: Penalty Abatement (PA)
Penalty Abatement (PA) This agreement strips away penalties tacked onto your tax balance. Penalties include failure-to-file, failure-to-pay, and failure-to-deposit (for business owners). If you’ve never had a penalty before, a first-time abatement (FTA) penalty waiver may apply.
This agreement strips away penalties tacked onto your tax balance. Penalties include failure-to-file, failure-to-pay, and failure-to-deposit (for business owners). If you’ve never had a penalty before, a first-time abatement (FTA) penalty waiver may apply. Otherwise, your tax relief consultant can fight for a reasonable cause abatement if any of the following apply:
- Illness, death, or incapacitation of the taxpayer or their immediate family
- Fire, casualty, natural disaster, etc. affecting the taxpayer
- Inability to obtain records and documents
Number 4: Currently Not Collectible (CNC)
In cases of extreme financial hardship, your tax rep can argue that you can’t afford to pay anything. With this option, your tax debt goes on the back burner, and you make no monthly payments although penalty and interest keep accruing. The big advantage of CNC is that the 10-year statute of limitations on collection keeps ticking so you might be able to ride it out and pay nothing on the tax debt.
If you’ve received an IRS final notice or threatening letter, don’t ignore it. Instead, contact me immediately to discuss your case. You will speak with me DIRECTLY, NO SALESPERSON, NO PARALEGAL OR ANYONE ELSE when it comes down to case evaluation and decisions. I can even represent you if there is the potential for criminal tax charges.
Ray Haselman, BBA MBA