The IRS yesterday announced that they have begun sending tax bills to those who filed returns but didn’t pay their entire balance.
In June or July, taxpayers who still have a balance with the IRS will receive a letter—possibly a CP14 or CP501 Notice—informing them about the remaining amount. Given the prevalence of tax-related identity theft scams, it’s likely that clients may contact tax professionals to help determine that the communication is authentic.
The IRS warned that unpaid balances result in late-payment penalties, interest, and liens against a taxpayer’s property—which can result in the agency seizing that asset. Needless to say, this isn’t an ideal situation for either the taxpayer or the IRS, which is why they listed a number of payment options:
Paying online is only an option for those “who owe $50,000 or less in combined income tax, penalties, and interest and businesses that owe $25,000 or less in payroll tax and have filed all tax returns.” To get started, taxpayers just need to apply on the IRS Online Payment Agreement webpage.
Those who can’t afford to pay in full may try to negotiate an installment-payment agreement with the IRS. The payments are made as direct deposits from either a bank account or payroll deduction, and they can be used to show a good-faith effort on the part of taxpayers to meet their tax obligation.
Another option available to qualifying taxpayers who are unable to pay their tax bill is asking the IRS to delay collection. While not a debt cancellation, delated collection means the IRS will wait until the taxpayer is in a good enough financial position to pay.
Offer in Compromise
Taxpayers whose financial situation simply cannot sustain making a payment in full to the IRS may be able to negotiate paying a smaller amount than what is technically owed. The IRS has an online tool that can help taxpayers learn if they qualify for an offer in compromise.
Since the Tax Cuts and Jobs Act—among other things—changed tax brackets, eliminated personal deductions, and increased the standard deduction, taxpayers may want to schedule an appointment with a tax professional for tax planning advice. As the IRS points out, making adjustments to tax withholding on Form W-4 can help taxpayers avoid being unprepared on Tax Day.