An Interview with Arnold S. Goldstein, Ph.D.
Q: If a person is too financially strapped to pay one whopping tax bill, can he or she ask to make installment payments on the amount owed?
A: Yes. If you are filing your return and don’t have the money to fully pay the IRS, you can request to make monthly installment payments. The IRS has a new Form 9465, the Installment Agreement Request, which you must complete and attach to your tax return. On the form, you will be asked to indicate the amount you think you can pay each month. If your installment proposal is approved, the IRS will send you a letter informing you that your request was approved, how to pay the one-time fee of $43, and how to make your first installment payment. You will also be charged interest and may be charged a late payment penalty. If your installment proposal is unacceptable, the IRS will send you a letter and tell you that your request has been denied. Either way, you usually will receive a response within 30 days.
Q: When is an individual’s tax return considered delinquent?
A: When a tax return is not postmarked by or before the due date (generally, April 15) or by dates allowed through the IRS extension periods (August 15 and October 15), it will be considered late.
Q: Is there anybody I can contact to help me handle my ongoing tax problems with the IRS?
A: Yes. You could contact the Taxpayer Advocate Service. The Taxpayer Advocate Service acts on behalf of taxpayers with problems or disputes that have not been resolved through normal IRS channels. Each state has at least one local Taxpayer Advocate.
Q: What is the Taxpayer Bill of Rights?
A: It has been a law since 1996. The purpose of the law is to educate taxpayers and let them know in plain English what the IRS can and cannot do when dealing with taxpayers. It is intended to provide an increased level of protection and expanded rights for individual taxpayers when dealing with the IRS.
Q: What is an Offer in Compromise?
A: It is the official written agreement between a taxpayer and the IRS whereby the IRS agrees to settle IRS debt for less than the full amount owed. You might want to consider an Offer in Compromise if you are unable to pay your taxes in full or you are facing severe or unusual economic hardship.
Q: Who can submit an Offer in Compromise?
A: Any taxpayer who has filed all required federal tax returns, timely paid all required employment taxes, if applicable, and is not involved in an open bankruptcy proceeding can submit an Offer in Compromise. This includes: individuals, married couples, incorporated businesses, partnerships, non-profit organizations, receivers, trustees of trusts, and executors of estates.
Q: How do I know if I can submit an Offer in Compromise to the IRS?
A: You may be eligible in any one of the following situations:
- You don’t believe you owe the tax amount that has been assessed.
- You don’t believe you can ever pay the full amount of taxes owed.
- You agree that the amount of taxes owed is correct, but you are unable to pay the amount in full because collection of the taxes owed would create an economic hardship or would be unfair.
Q: Are Offers in Compromise open to public inspection?
A: Yes. A copy of the Abstract and Statement and the attached narrative report for an accepted Offer in Compromise are available for inspection and copying for one year. It might be helpful to review Offers in Compromise that have been approved in your district within the past year for an idea of what the IRS may accept in your case. Keep in mind, however, that you generally must offer an amount greater than or equal to the net equity of your assets plus the amount the IRS could collect from your future income. You cannot offer $0.
Q: When a bank account is levied by the IRS, when must the bank turn over the money to the IRS?
A: A levy is a legal seizure of your property to satisfy a tax debt. Banks have 21 days from the date of levy to turn over funds to the IRS. This gives the taxpayer time to resolve the tax problem, make other arrangements to pay, or settle disputes concerning ownership of funds in these accounts. The “21-day rule” applies only to banks. Other parties holding your funds must turn them over within the time indicated in the levy. Accounts receivable are paid to the IRS in accordance with their original credit terms.
Q: What does it mean to be classified by the IRS as “temporarily uncollectible?”
A: The IRS has the option, in rare circumstances, to classify a taxpayer as “temporarily uncollectible”. In order to do so, the IRS must determine that you have no assets worth chasing and that your present lifestyle and foreseeable income do not exceed what you need to sustain a basic lifestyle. If the IRS decides, however, that you have even $50 in surplus income each month, it will expect that $50 to be applied to your tax liability. Keep in mind that any delay in collection will increase the amount owed because penalties and interest continue to be charged until you pay the full amount.
Q: Do you recommend seeking professional advice when dealing with an IRS problem?
A: My book provides you with insight into how to attack an IRS problem and arms you with the information you need to speak knowledgeably with a tax professional. However, the consequences of an IRS problem can be far-reaching and, for that reason, it is advisable that you speak with a tax professional after you have done as much research and information gathering on your own as you can. But, be very careful not to let any deadlines go by!
Arnold S. Goldstein, Ph.D., best-selling author, attorney, and professor Emeritus, has protected the assets of thousands of individuals and companies nationwide. A popular radio and television guest, he has appeared on CNN, CNBC, and the Today Show, and engaged radio audiences on more than 400 shows. His wealth-protection strategies have been featured in countless magazines, such as Inc, CFO, Business Week, Entrepreneur, Success, Forbes, and Fortune. He lives in Delray Beach, Florida.
He is the author of Solving Business Problems Made E-Z. Do you owe taxes you can’t pay? Solving IRS Problems Made E-Z is a step-by-step guide to all your options, including the IRS’s little-known “Offer in Compromise” program. Packed with strategies, tactics, and secrets, this book shows you why it’s easier than ever to settle your tax problems for a small fraction of what you owe. Discover what you must do right now to negotiate your best deal with the IRS…even before you file your tax return. This book is available directly from www.madee-z.com.