Are you one of the many taxpayers eagerly awaiting the day the IRS resumes sending notices about your outstanding tax balance?
While the delay may give some a sense of reprieve, it’s crucial to recognize that the IRS hasn’t forgotten about outstanding balances. Interest and penalties continue to accrue until the final payment, and ignorance of the situation can lead to more significant financial consequences. As we eagerly await the notices’ return, here are some essential things to know about outstanding tax balances.
Key Points to Consider:
1. Penalties and Interest Continue to Accrue:
- Ignoring unfiled tax returns or unpaid taxes only exacerbates the situation.
- Check out our blog on the failure to file penalty, failure to pay penalty, and interest for a comprehensive understanding.
2. Offset of Refunds and Overpayments:
- The IRS can use current refunds to cover prior unpaid tax debts and qualifying debts.
3. Enforcement Continues on a Case-by-Case Basis:
- Despite the notice suspension, IRS enforcement persists, potentially leading to wage or bank account levies and federal tax lien filings.
4. Passport Revocation:
- Seriously delinquent tax debts can lead to the State Department revoking a taxpayer’s passport.
Recommendations:
To proactively address unfiled returns and unpaid taxes, taxpayers can take immediate steps to mitigate further interest and penalties:
1. Create or Access an Online Account at IRS.gov:
- View balances, make payments, and apply for payment plans online.
2. Determine Balances Due:
- Request account transcripts, call the IRS for a current balance, or utilize the online account.
3. Consider Payment Options:
- Paying the balance due promptly reduces future penalties and interest.
- Explore various payment plans or submit Form 9465 for an installment agreement.
4. Explore Offer in Compromise and Currently Not Collectible Status:
- Submit an Offer in Compromise or request Currently Not Collectible Status for more flexible payment options.
Collection Process Insights:
Even with the notice suspension, the IRS continued to mail initial collection notices. When the automated collection notices resume, expect the following process:
- Notice Stream and ACS Unit:
- Outstanding accounts enter the notice stream, triggering subsequent notices.
- The Automated Collection System (ACS) unit handles these cases.
- Field Collection Revenue Officer:
- Certain criteria may lead to the assignment of a field collection revenue officer for more complex cases.
- Enforcement Tools:
- Levies, federal tax lien notices, and other tools may be employed for collections.
Addressing outstanding tax issues promptly is advisable, rather than waiting for the IRS to initiate contact. Seeking advice from a tax professional or a Low Income Taxpayer Clinic (LITC) is a prudent step.
Penalty Relief Options:
Taxpayers facing penalties may qualify for relief under various options:
1. Reasonable Cause:
- Show that failure to file or pay taxes on time was due to reasonable cause, not willful neglect.
2. First-Time Abate (FTA):
- Consider FTA if there is filing compliance, payment compliance, and a clean penalty history.
Stay tuned for Part Two, where we’ll delve into the revised guidance for unannounced revenue officer visits to taxpayers.
Low Income Taxpayer Clinics (LITCs):
LITCs offer independent assistance for taxpayers with income below a certain level. Services include representation in audits, appeals, and tax collection disputes.
If you’re also looking for a professional Taxation services, then you can contact Crystal Clear Tax. We take pride in meeting the unique needs of single mothers entrepreneurs, company owners, and professionals from various industries. Our expertise includes accounting and bookkeeping, financial advising, and tax services. Let us be your partner in navigating the complexities of tax challenges. Book a discovery call with us today and experience the clarity you deserve in your financial journey.
