By A.J. Gross, C.P.A., E.A.
You’re expecting a large tax bill. You are afraid of the big bad IRS. The IRS will take your car in the middle of the night. The IRS will possess your home and leave you with no place to live. The IRS will wipe out your bank account and garnish your wages. The IRS will make it impossible for you to earn a living. How does the IRS expect you to pay the taxes owed if you can’t earn a living?
It is common to think of the worst when you owe taxes. Most of these thoughts are extreme. The IRS is not in the business of taking your possessions such as your home or car. The IRS rarely takes this type of action. It is more common for the IRS to wipe out your bank account or garnish your wages if you do nothing. However, you have time and several options to address your taxes well before the IRS takes action.
The IRS will start sending you letters. The first letter will demand payment within 30 days. 30 days pass and you get another IRS letter. The letter is titled Second Notice. You do nothing. The IRS then sends an Important Notice with Intent to Levy. Now the IRS is getting serious. You still do nothing. Finally, the IRS sends a Final Notice and Your Right to a Hearing. This is the “uh oh” letter. By law the IRS must notify you 30 days prior to taking any enforcement action. This legal letter is called the “Final Notice and Your Right to a Hearing” letter. If you fail to do anything after you receive the Final Notice Letter, the IRS can make your life difficult. The likely action will be bank garnishments and wage levies.
It may take the IRS 4 to 6 months after you filed your taxes to send the “uh oh” Final Notice Letter. I recommend you explore your options immediately. The IRS will work with you. For example, you can request extra time to pay the taxes or set up an installment agreement. There are some instances when you can negotiate the amount owed. This is called an Offer in Compromise. Do not wait. Your options will be limited once the IRS starts levying wages or wiping out your bank account.
IRS Circular 230 Disclosure: To the extent this writing contains advice on a federal tax issue, the advice is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed in this communication.
A.J. Gross, C.P.A., E.A. is President of ALG Tax Solutions. A.J. Gross can be contacted at AJGross@algtaxsolutions.
com or www.ALGTaxSolutions.com.