If you are an Atlanta, GA taxpayer with a tax bill you are unable to pay, this article is for you!
There are two key steps that you should keep in mind if you have an IRS tax bill you are unable to pay.
1. Tax Compliance
The IRS will agree to negotiate with you only if you comply with their rules. This is referred to as “tax compliance.” Tax compliance relates to both filing tax returns and making tax payments.
The IRS will consider you compliant if the past 6 years of tax returns have been filed.
Suppose you are an employee, you are compliant if you pay sufficient taxes through withholding from your paycheck. If you are a business owner, you are compliant if you have paid your required quarterly estimated tax payments. If your business has payroll taxes, you are compliant if you have made all your payroll tax deposits and filed all of your payroll tax returns throughout the year.
In the event that you cannot afford to pay your taxes, do not make the mistake of thinking that it would be better to not file at all. The IRS will not negotiate with you if you have not filed your tax returns. Additionally, if you do not file the tax return, penalties, plus interest, will be added to your tax bill. Penalties for missing returns are 5% per month, up to a maximum of 25%.
Therefore, if you owe taxes for multiple years, we recommend that you pay your most recent tax bill first to show compliance. Then go back and resolve the older tax years with the IRS.
2. Options Available to You
The second step to consider when you are unable to pay a tax bill is to identify which of the available options is best for you. There are generally three options available when dealing with the IRS. Each option has its own set of requirements
The first option is to get the IRS to considered you “non-collectible.” This temporarily stops all IRS collection activity until your situation changes or the statute of limitations on your debt expires.
The second option is to request an Installment Agreement. The terms of the agreement will depend on your facts and circumstances.
The third option is to make an Offer-In-Compromise. The offer always lowers the amount of the tax owed – if you qualify.
To watch our YouTube video on this topic, click here!
Massey and Company is a boutique CPA firm in located in Atlanta, Georgia serving the needs of small businesses and their owners.