Drake Software blog for tax pros, covering tax, IRS news, and more

Some Taxpayers Now Receiving Tax Bills from the IRS

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:

Online

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.

Installments

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.

Delayed Collection

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.

Ryan Norton

Whether designing superheroes, penciling caricatures, or just doodling, I always knew I was going to earn some sort of art degree while in college. That was my goal before I decided to trade Edgar Degas for Edgar Allan Poe during a Freshman English class. The BA in English soon morphed into a double-major in English and Philosophy, eventually becoming an MA in English. It only makes sense that I learned of a writing opportunity for a local marketing firm while teaching a first-year college English course. Before I knew it, I was writing and editing tax-related articles for Taxing Subjects, and this has been my home since 2014.

comments powered by Disqus