What To Do If You Can’t Pay Your Taxes?
Let’s say you got a letter from the IRS and you are shocked, of course.
Well, first of all, breathe and open it.
Second, read it carefully.
Let’s say this is the first letter the IRS has sent you. It is most likely just a bill to pay taxes.
What you need to do is:
-to contact a tax professional who has experience in tax resolution
-or doing it yourself kind of thing.
If you are planning on doing it yourself, call the IRS at 5 pm Eastern Time. West Coast IRS is more friendly than the East Coast.
If you don’t have money to pay the IRS, talk to them and see if you can get a Currently-Uncollectible status. This will not put the Statue of Limitation “on hold” and will also give you some time to figure out how to pay them. Another positive is that the ten-year Statute of Limitation continues to run if you are in the Currently-uncollectible status(CNC). What are the negatives? Interest and penalties continue to grow.
What does the IRS need from you when you are trying to get the CNC status?
They need to see that you have no income or assets, no equity in assets, or insufficient income to make any payment without hardship.
For example, some below activity would help show that your income and assets are limited:
You were eligible for the Earned Income Tax Credit
If you participated in:
? Government Issued Unemployment Compensation
? Low-income home energy assistance program (LIHEAP)
? Section 8 Housing Assistance
? Receiving Food Stamps
? Eligible for Medicaid or Supplemental Security Income (SSI)
? Assistance from programs administered by the U.S. Department of Health and Human Services.
Any other assistance was showing that you were unable to pay reasonable necessary living expenses.
You may have to fill out Form 433?A, Collection Information Statement for Wage Earners and Self ?Employed Individuals
or Form 433?B, Collection Information Statement for Businesses.
If you have income or equity in assets and enforced collection of the income or assets would not cause hardship, then you would not be eligible for the CNC status.
The CNC status is not permanent. You will be followed up on at least an annual basis.
The below expenses are included to show your household expenses:
Court-ordered restitution payments are allowable expenses.
The taxpayer has a terminal or a serious illness or excessive medical bills.
Unemployment or no source of income.
Example: Monthly living expenses allowed x 12 (months) = Annual living expense amount.
Any documentation from you will be secured by the IRS and saved in their records.
You may have to show that you are current on all tax filings.
It is also essential to note that some Estate planning might be needed:
if you are an heir to an inheritance, please, don’t forget to do estate planning, where the inheritance would go to a Trust.
The Trust should say, “as long as the heir owes money to the IRS, the money stays in the Trust or goes to another person.”