IRS Tips to Help People Pay Their Taxes

What to do if you owe the IRS taxes?

If you owe tax, the IRS offers safe and easy ways to pay. Check out these payment tips:

  • Pay your tax bill.  If you get a bill, you should pay it as soon as you can. You should always try to pay in full to avoid any additional charges. See if you can use your credit card or to get a loan to pay in full. If you can’t pay in full, you’ll save if you pay as much as you can. The more you can pay, the less interest and penalties you will owe for late payment. The IRS offers severalpayment options on IRS.gov.
  • Use IRS Direct Pay.  The best way to pay your taxes is with IRS Direct Pay. It’s the safe, easy and free way to pay from your checking or savings account. You can pay your tax in just five simple steps in one online session. Just click on the “Payments” tab on IRS.gov.

 

IRS Payment Plan Information

  • Get a short-term payment plan.  If you owe more tax than you can pay, you may qualify for more time, up to 120 days, to pay in full. You do not have to pay a user fee to set up a short-term full payment agreement. However, the IRS will charge interest and penalties until you pay in full. It’s easy to apply online at IRS.gov. If you get a bill from the IRS, you may call the phone number listed on it. If you don’t have a bill, call 800-829-1040 FREE for help.
  • Apply for an installment agreement.  Most people who need more time to pay can apply for anOnline Payment Agreement on IRS.gov. A direct debit payment plan is the hassle-free way to pay. The set-up fee is much less than other plans and you won’t miss a payment. If you can’t apply online, or prefer to do so in writing, use Form 9465, Installment Agreement Request. Individuals can use Direct Pay to make their installment payments. For more about payment plan options, visit IRS.gov.

 

Getting an IRS Offer in Compromise

  • Check out an offer in compromise.  An offer in compromise, or OIC, may let you settle your tax debt for less than the full amount you owe. An OIC may be an option if you can’t pay your tax in full. It may also apply if full payment will cause a financial hardship. No everyone qualifies, so make sure you explore all other ways to pay your tax before you submit an OIC to the IRS. Use the OIC Pre-Qualifier tool to see if you qualify. It will also tell you what a reasonable offer might be.
  • Change your withholding or estimated tax.  If you are an employee, you can avoid a tax bill by having more taxes withheld from your pay. To do this, file a new Form W-4, Employee’s Withholding Allowance Certificate, with your employer. The IRS Withholding Calculator tool on IRS.gov can help you fill out the form. If you are self-employed you may need to make or change your estimated tax payments.

What if I can’t pay my taxes to IRS?

What if I can’t pay my taxes?

Don’t panic. If you cannot pay the full amount of taxes you owe, you should still file your return by the deadline and pay as much as you can to avoid penalties and interest. You also should contact the IRS to discuss your payment options at 1-800-829-1040 FREE.

 

Short Term IRS Extensions

The agency may be able to provide some relief such as a short-term extension to pay, an installment agreement or an offer in compromise, or by temporarily delaying collection by reporting your account as currently not collectible until you are able to pay. In some cases, the agency may be able to waive penalties. However, the agency is unable to waive interest charges which accrue on unpaid tax bills. For more information, see The Collection Process and Tax Payment Options. See the Form 1040 instructions on the About Form 1040 page for additional guidance on filing and paying your taxes.

 

What if I can’t pay my IRS installment agreement?

You have several options available if your ability to pay has changed and you are unable to make payments on your installment agreement or your offer in compromise agreement with the IRS. Call the IRS immediately at 1-800-829-1040 FREE. Options could include reducing the monthly payment to reflect your current financial condition. You may be asked to provide proof of changes in your financial situation so have that information available when you call.

 

What if there is a federal tax lien on my home?

If there is a federal tax lien on your home, you must satisfy the lien before you can sell or refinance your home. There are a number of options to satisfy the tax lien. Normally, if you have equity in your property, the tax lien is paid (in part or in whole depending on the equity) out of the sales proceeds at the time of closing. If the home is being sold for less than the lien amount, the taxpayer can request the IRS discharge the lien to allow for the completion of the sale. Taxpayers or lenders also can ask that a federal tax lien be made secondary to the lending institution’s lien to allow for the refinancing or restructuring of a mortgage. The IRS currently is working to speed requests for discharge or mortgage restructing to assist taxpayers during this economic downturn.

 

Taxpayer Struggling to pay Tax Debt

To assist struggling taxpayers, the IRS plans to significantly increase the dollar thresholds when liens are generally filed. The new dollar amount is in keeping with inflationary changes since the number was last revised. Currently, liens are automatically filed at certain dollar levels for people with past-due balances. The IRS plans to review the results and impact of the lien threshold change in about a year.

Also, the IRS is making other fundamental changes to liens in cases where taxpayers enter into a Direct Debit Installment Agreement (DDIA). Additionally, the IRS will modify procedures that will make it easier for taxpayers to obtain lien withdrawals. Liens will now be withdrawn once full payment of taxes is made if the taxpayer requests it.

For more information, see IR-2011-20, IRS Announces New Effort to Help Struggling Taxpayers Get a Fresh Start; Major Changes Made to Lien Process; IR-2008-141, IRS Speeds Lien Relief for Homeowners Trying to Refinance, Sell; and Understanding a Federal Tax Lien.

 

What if a levy on my wages is causing a hardship?

Contact the IRS at the telephone number on the levy or correspondence immediately and explain your financial situation. Service is avaible from 8 a.m. to 8 p.m. local time, Monday through Friday. If the levy is creating an immediate economic hardship, the levy may be released. A levy release does not mean you are exempt from paying the balance. The IRS will work with you to establish payment plans or take other steps to help you pay off the balance. To help ensure quick action, please have the fax number available for the bank or employer office that is processing the levy. For more information, see Levy.

 

What if I can’t resolve my tax problem with the IRS?

Contact the Taxpayer Advocate Service (TAS). TAS is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should.

You can contact TAS by calling the TAS toll-free case intake line at 1-877-777-4778 FREE or TTY/TDD 1-800-829-4059 FREE to determine whether you are eligible for assistance. You can also call or write to your local taxpayer advocate, whose phone number and address are listed in your local telephone directory and in Publication 1546, Taxpayer Advocate Service – Your Voice at the IRS. You can file Form 911, Request For Taxpayer Advocate Service Assistance (And Application for Taxpayer Assistance Order), or ask an IRS employee to complete it on your behalf. For more information, go to http://www.irs.gov/advocate.

 

What if I need legal representation to help with my tax problem but can’t afford it?

Low Income Taxpayer Clinics (LITCs) represent low income taxpayers before the Internal Revenue Service, assist taxpayers in audits, appeals and collection disputes, and can help taxpayers respond to IRS notices and to correct account problems. If you are a low income taxpayer who cannot afford professional tax assistance or if you speak English as a second language (ESL) and need help understanding your taxpayer rights and responsibilities, you may qualify for help from an LITC that provides assistance for free or for a nominal charge. Although LITCs receive partial funding from the IRS, LITCs, their employees, and their volunteers are completely independent of, and are not associated with, the federal government. The LITCs are generally operated by nonprofit organizations or academic institutions.

 

IRS and Low Income Taxpayer Clinics (LITCs)

Each LITC independently decides if you meet the income guidelines and other criteria before it agrees to represent you. There is at least one LITC in each of the 50 states, the District of Columbia and Puerto Rico. You can find an LITC located in or near your area by using Publication 4134, Low Income Taxpayer Clinic List. This publication identifies all LITCs who represent low income taxpayers before the IRS or provide ESL services, and is available at www.irs.gov/advocateor your local IRS office.

Low income taxpayers also may be able to receive assistance from a referral system operated by state bar associations, state or local societies of accountants, and other nonprofit tax professional organizations.

Who Can Represent You Before the IRS?

Many people use a tax professional to prepare their taxes. Tax professionals with an IRS Preparer Tax Identification Number (PTIN) can prepare a return for a fee. If you choose a tax pro, you should know who can represent you before the IRS. There are new rules this year, so the IRS wants you to know who can represent you and when they can represent you. Choose a tax return preparer wisely.

 

What are Representation Rights before the IRS?

Representation rights, also known as practice rights, fall into two categories:

  • Unlimited Representation
  • Limited Representation

Unlimited representation rights allow a credentialed tax practitioner to represent you before the IRS on any tax matter. This is true no matter who prepared your return. Credentialed tax professionalswho have unlimited representation rights include:

 

What are limited representation rights in front of IRS

Limited representation rights authorize the tax professional to represent you if, and only if, they prepared and signed the return. They can do this only before IRS revenue agents, customer service representatives and similar IRS employees. They cannot represent clients whose returns they did not prepare. They cannot represent clients regarding appeals or collection issues even if they did prepare the return in question. For returns filed after Dec. 31, 2015, the only tax return preparers with limited representation rights are Annual Filing Season Program Participants.

 

Who can represent you before the IRS?

The Annual Filing Season Program is a voluntary program. Non-credentialed tax return preparers who aim for a higher level of professionalism are encouraged to participate.

Other tax return preparers have limited representation rights, but only for returns filed before Jan. 1, 2016. Keep these changes in mind and choose wisely when you select a tax return preparer. Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.

How long does IRS have to collect taxes?

As a general rule, there is a ten year statute of limitations on IRS collections. This means that the IRS can attempt to collect your unpaid taxes for up to ten years from the date they were assessed. Subject to some important exceptions, once the ten years are up, the IRS has to stop its collection efforts.

 

How long does IRS have to collect taxes?

The IRS can attempt to collect your taxes up to 10 years from the date they were assessed. However, there are ways this time period can be suspended. For example, by law, the time to collect may be suspended while: IRS considering your request for an Installment Agreement or Offer in Compromise. If your request is rejected, we will suspend collection for another 30 days, and during any period the Appeals Office is considering your appeal request.

You live outside the U.S. continuously for at least 6 months. Collection is suspended while you’re outside the U.S.

The tax periods the IRS is collecting on are included in a bankruptcy with an automatic stay. The IRS will suspend collection for the time period we can’t collect because of the automatic stay, plus 6 months. • You request a Collection Due Process hearing. Collection will be suspended from the date of your request until a Notice of Determination is issued or the Tax Court’s decision is final.

IRS considering your request for Innocent Spouse Relief. Collection will be suspended from the date of your request until 90 days after a Notice of Determination is issued, or if you file a timely petition to the Tax Court, until 60 days after the Tax Court’s final decision. If you appeal the Tax Court’s decision to a U.S. Court of Appeals, the collection period will begin 60 days after the appeal is filed, unless a bond is posted.

 

What is an IRS Assessment of Tax Due?

The time the IRS has to collect begins when they place your debt officially on their books.  This is called an assessment.  Assessments typically occur in three situations: (1) after you file your tax return and there is an amount due but not paid (2) if you did not file a return, the IRS will make an estimated return filing and put an estimate of your debt on their books (3) after the IRS completes an audit of your tax return. If your Collection Statute Expiration Date (CSED) is near, the IRS may act aggressively to get you to pay as much as possible before the deadline or agree to extend it.

 

IRS Collection Extension

The 10-year statute of limitations for tax collection isn’t set in stone, and certain events can extend the amount of time the IRS has to collect from you. If you file bankruptcy or leave the country, the statute of limitations stops running and resumes once your bankruptcy case is complete or you return to the U.S. Filing an offer in compromise in an effort to settle your tax debt can extend the statute of limitations by one year or the duration of your proposed payment plan. If you want to pay your debt but the statute of limitations has either expired or is close to expiring, you can sign a waiver and extend the collection period voluntarily.

As of December 31, 2013, 2,371 taxpayers remain subject to IRS collection action because of waivers of the applicable statutory period for collection, which violate the IRS policy limit of five years. Before 2000, IRS collection personnel solicited waivers to extend the collection period when it did not appear the taxpayer could pay the tax owed prior to the collection statute expiration date (CSED). Congress limited this practice as part of the IRS Restructuring and Reform Act of 1998 (RRA 98), which generally ended CSED waivers, other than for extensions entered in connection with installment agreements (IAs).3 In response to Taxpayer Advocate Directive (TAD) 2010-3, the IRS Small Business/Self-Employed Division (SB/SE) and TAS formed a workgroup to investigate and resolve CSED extensions that exceeded five years. The IRS has placed almost 82 percent (1,939) of these accounts in currently not collectible (CNC) status or in the collection queue, and has no plan to collect these amounts. A TAS analysis of these accounts reveals that 309 of these taxpayers are deceased. Further, more than half of the taxpayers subject to these CSED extensions owe more than $50,000, of which almost 76 percent is attributable to accrued penalties and interest.

 

 

Monthly IRS Tax Payments, Tax Debt, Installment Agreements

If you’re financially unable to pay your tax debt immediately, you can make monthly payments through an installment agreement. As long as you pay your tax debt in full, you can reduce or eliminate your payment of penalties or interest, and avoid the fee associated with setting up the agreement.

Before applying for any payment agreement, you must file all required tax returns.

 

You may be eligible to apply for an online IRS payment agreement

  • Individuals must owe $50,000 or less in combined individual income tax, penalties and interest, and have filed all required returns.
  • Businesses must owe $25,000 or less in payroll taxes and have filed all required returns.
  • If you meet these requirements, you can apply for an online payment agreement.

 

Even if you’re ineligible for an online IRS payment agreement, you can still pay in installments

 

Small Businesses with employees can apply for an in-Business Trust Fund Express IRS installment agreement

  • These installment agreements generally do not require a financial statement or financial verification as part of the application process.
  • Find out if you qualify and how to apply.

 

Understand your IRS agreement & avoid default

  • Your future refunds will be applied to your tax debt until it is paid in full;
  • Pay at least your minimum monthly payment when it’s due;
  • Include your name, address, SSN, daytime phone number, tax year and return type on your payment;
  • File all required tax returns on time & pay all taxes in-full and on time (contact us to change your existing agreement if you cannot);
  • Make all scheduled payments even if we apply your refund to your account balance; and
  • Ensure your statement is sent to the correct address, contact us if you move or complete and mail Form 8822, Change of Address (PDF).

If you don’t receive your statement, send your payment to the address listed in your agreement.

 

IRS reinstatement fee

There may be a reinstatement fee if your agreement goes into default. Penalties and interest continue to accrue until your balance is paid in full. If you are in danger of defaulting on your payment agreement for any reason, contact us immediately. We will generally not take enforced collection actions:

  • When an installment agreement is being considered;
  • While an agreement is in effect;
  • For 30 days after a request is rejected, or
  • During the period the IRS evaluates an appeal of a rejected or terminated agreement.

Form 9465 IRS Installment Agreement Request

Form 9465 is the IRS Installment Agreement Request form that is used to help settle tax debt. If you owe $50,000 or less, you may be able to establish an installment agreement online, even if you have not yet received a bill for your taxes. Go to IRS.gov to apply to pay online.

 

What is an IRS Installment Agreement?

An installment agreement allows the taxpayer to breakdown their tax debt into manageable payments.  Usually an installment agreement requires equal monthly payments based on the amount of taxes owed, the amount of money the IRS can collect at one time, and the amount of time they are allowed to collect the funds from the taxpayer.  Installment agreements are not an ideal way of paying a tax debt, since the taxpayer will still accrue late payment penalties and interest over the life of the agreement.

How start an IRS Installment Agreement with Form 9465?

To arrange an installment agreement with the Internal Revenue Service, download Form 9465, Installment Agreement Request, from the IRS’s website and fill in the amount that you can pay each month, the day you wish to make your payment each month (consider choosing the 28th day, the last monthly date the IRS will accept), your name, address, social security number; etc. Generally, you can have up to 60 months to pay. In certain circumstances, you can have longer to pay or your agreement can be approved for an amount that is less than the amount of tax you owe (these two alternatives are not explored in this article).

 

Requesting IRS Installment Agreement for Tax Debt

Your request for an installment agreement cannot be turned down if the tax you owe is not more than $10,000 and all three of the following conditions apply:

  • During the past 5 tax years, you (and your spouse if filing a joint return) have timely filed all income tax returns and paid any income tax due, and have not entered into an installment agreement for payment of income tax.
  • The IRS determines that you cannot pay the tax owed in full when it is due and you give the IRS any information needed to make that determination.
  • You agree to pay the full amount you owe within 3 years and to comply with the tax laws while the agreement is in effect.

After the installment agreement is approved, the IRS will send you a monthly notice showing the remaining amount you owe, and the due date and amount of your next payment on a detachable voucher.

Approval of Installment Agreement

The IRS will usually let you know within 30 days after we receive your request whether it is approved or denied. However, if this request is for tax due on a return you filed after March 31, it may take us longer than 30 days to reply. If we approve your request, we will send you a notice detailing the terms of your agreement and requesting a fee of $120 ($52 if you make your payments by direct debit). However, you may qualify to pay a reduced fee of $43 if your income is below a certain level. The IRS will let you know whether you qualify for the reduced fee.

 

Who should not file Form 9465?

Do not file this form if you are currently making payments on an installment agreement or can pay your balance in full within 120 days. Instead, call 1-800-829-1040. Do not file if your business is still operating and owes employment or unemployment taxes. Instead, call the telephone number on your most recent notice. If you are in bankruptcy or we have accepted your offer-in-compromise, see Bankruptcy or offer-in-compromise, in the instructions

If you do not make your payments on time or do not pay any balance due on a return you file later, you will be in default on your agreement and we may take enforcement actions, such as the filing of a Notice of Federal Tax Lien or an IRS levy action, to collect the entire amount you owe. To ensure that your payments are made timely, you should consider making them by direct debit.

If you are in bankruptcy or we have accepted your offer-in-compromise, do not file this form. Instead, call 1-800-829-1040 to get the number of your local IRS Insolvency function for bankruptcy or Technical Support function for offer-in-compromise.

 

How to Pay IRS Installment Agreement?

If you’re financially unable to pay your tax debt immediately, you can make monthly payments through an installment agreement. As long as you pay your tax debt in full, you can reduce or eliminate your payment of penalties or interest, and avoid the fee associated with setting up the agreement.

 

Form 9465 IRS Installment Agreement

If you choose, during the entry of your information for Form 9465, to set up monthly Electronic Funds Withdrawals for your installment request you will be prompted to enter your banking information.  Then, when you proceed through the electronic filing steps you would want to select Mail a Check on the screen titled E-Filing – Federal Balance Due Options.  You do this because in the event the IRS does not approve the installment request, the Form 1040-V voucher that will print with the return is what you would use to submit payment.

 

Paying the IRS Installment Agreement

You would NOT want to enter your banking information under the Direct Withdrawal selection because that would result in the entire amount being withdrawn all at once.  The banking information for Form 9465 you would have already entered in the Q&A section for Form 9465.  In a later screen during the filing steps you will be prompted to view and/or print the Federal E-File Instructions.  Those instructions will explain that filing Form 9465 does NOT guarantee your request for a payment plan and that the IRS will contact you to notify you of the status of your request for an installment plan.

Form 843, IRS Claim for Refund and Request for Abatement

Form 843 should not be used by individuals to claim an income tax refund, or to request a reduction of income, estate or gift tax. Businesses should not use the form to request an abatement of employment taxes, such as FICA. If you are claiming a refund, Form 843 must be submitted no later than three years after the return was filed or two years after the taxes were paid, whichever is later. The IRS will only abate interest on a tax in certain limited circumstances that involve IRS delays or errors. If you are requesting an abatement of interest for this reason, you must write “Request for Abatement of Interest Under Section 6404(e)” at the top of Form 843.

 

What is IRS Form 843?

Individual taxpayers can use Form 843 to request, for example, a refund of Social Security or Medicare taxes withheld in excess or in error, or for penalties levied by the IRS in error. Taxpayers will continue to use Form 843 when requesting abatement of assessed penalties and interest. In addition, there is no “X” form for the Form 940, and taxpayer will continue to use a Form 940 for amended returns.

Who should not use IRS Form 843?

Do not use Form 843 to request a refund of income tax or Additional Medicare Tax. Employers cannot use Form 843 to request a refund of Federal Insurance Contributions Act (FICA) tax, Railroad Retirement Tax Act (RRTA) tax, or income tax withholding. Also do not use Form 843 to amend a previously filed income or employment tax return. Do not use Form 843 to claim a refund of agreement fees, offer-in-compromise fees, or lien fees. In certain circumstances, you can have longer to pay or your agreement can be approved for an amount that is less than the amount of tax you owe.

 

When should you file Form 843?

If you are unable to receive a refund of these taxes from your employer, you may then file Form 843 and Form 8316 to request a refund from IRS. Include the following:

  • a completed Form 843
  • a completed Form 8316
  • a copy of your W-2
  • a copy of the visa page of your passport
  • a copy of Form I-94
  • a copy of your work authorization (A copy of your EAD authorizing OPT or Economic Hardship)
  • a copy of front and back of your Form I-20 or DS-2019 authorizing CPT
  • a written statement that you unsuccessfully requested a refund of these taxes from your employer. (This can be the statement you obtained from your employer, or your own statement that you were denied refund of these taxes by your employer and were unable to obtain a statement from them.)

 

IRS Interest on Taxes Owed

The IRS will only abate interest on a tax in certain limited circumstances that involve IRS delays or errors. If you are requesting an abatement of interest for this reason, you must write “Request for Abatement of Interest Under Section 6404(e)” at the top of Form 843. Complete all lines on the form, on which you will have to give the following information:

Generally, you must file a separate Form 843 for each tax period or fee year or type of tax or fee. There are exceptions for certain claims.

Who Files Form 843?

You can file Form 843 or your authorized representative can file it for you. If your authorized representative files Form 843, the original or copy of Form 2848, Power of Attorney and Declaration of Representative, must be attached. You must sign Form 2848 and authorize the representative to act on your behalf for the purposes of the request.

You can request a net interest rate of zero by writing on top of Form 843 “Request for Net Interest Rate of Zero under Rev. Proc. 2000-26.” You must provide documentation to substantiate that you are the taxpayer entitled to receive the interest due on the overpayment.

 

When not to File Form 843?

Form 843 is limited in the types of tax, interest, penalties, and fees that you can request to be abated. You also cannot use Form 843 for the following reasons:

  • For an employer to request a refund or abatement of FICA tax, Railroad Retirement Tax, or income tax withholding
  • To amend a previously filed income or employment tax return
  • To claim a refund of agreement fees, offer-in-compromise fees, or lien fees
  • To request an abatement of gift or estate taxes

There are also circumstances where you may not have to file Form 843, or where you may have to file a different form. If you receive a notice from the IRS, you should follow the instructions on the notice. You may not be required to file Form 843 in all circumstances.

 

Filing 1040X to Receive Tax Refund Instead of Form 843

Use Form 1040X, Amended U.S. Individual Income Tax Return, to change any amounts reported on Form 1040, 1040A, 1040EZ, 1040NR, or 1040NR-EZ, to change amounts previously adjusted by the IRS, or to make certain elections after the prescribed deadline (see Regulations sections 301.9100-1 through -3).

File only one Form 843 if the interest assessment resulted from the IRS’s error or delay in performing a single managerial or ministerial act affecting a tax assessment for multiple tax years or types of tax (for example, where 2 or more tax years were under examination). Check the applicable box(es) on line 3 and provide a detailed explanation on line 7.

What Kind of Help Can Low Income Taxpayers Receive

Low income taxpayer means an individual whose income does not exceed 250 percent of the poverty level, as determined in accordance with official guidance published by the federal government. Net earnings from a sole proprietorship, a single shareholder S-corporation, or a single member LLC are included in income for purposes of determining if a taxpayer is low income.

Business Entity and Taxpayer Assistance

However, a business entity is not a low income taxpayer eligible for LITC representation, even if an owner, partner, shareholder, beneficiary, or member of the business entity is an individual whose income does not exceed 250 percent of the poverty level.

 

What is a controversy with the IRS?

Controversy means a dispute between an individual and the IRS concerning the determination, collection, or refund of any tax, penalties, additions to tax, or interest under the Internal Revenue Code, and includes any proceeding brought by the taxpayer under Title 26. In representing a tax – payer in a controversy with the IRS, an LITC may also need to represent the taxpayer in a contro – versy with a state or local tax agency concerning the same or related tax matter. A controversy includes a dispute related to the tax provisions of the Affordable Care Act. A controversy does not include a criminal tax matter, but may include certain civil actions arising under the Internal Revenue Code, for example those arising under IRC §§ 7431—7435.

 

What is the amount in controversy?

Amount in controversy means the amount at issue for each tax year for which the LITC is representing the taxpayer. The amount includes the tax liability in dispute for a tax year, plus any related additions to the tax, additional amounts, and penalties imposed. Interest is generally excluded from the amount in controversy, unless the amount of interest is disputed independently from the associated tax liability. For example, in the collection context (e.g., notice and demand, notice of determination under IRC § 6330), interest is always in dispute and is therefore included in the amount in controversy. Further, the amount in controversy is limited to the amount in dispute, which may be less than the amount specified in a statutory notice of deficiency. If the taxpayer is disputing the amount due in more than one tax year or period, the amount in controversy is the amount in dispute for a single tax year.

 

What kind of services do Low Income Taxpayer Clinics Provide?

LITCs are required to offer tax education to low income taxpayers and taxpayers who speak English as a second language (ESL). Educational activities should address taxpayer rights and responsibilities as well as tax issues of particular significance to the intended audience. Whenever possible, LITCs are urged to use face-to-face contact (whether in consultations or in a group workshop), as it is an excellent method for educating taxpayers. Clinics may address a wide range of substantive tax issues in their educational programs and materials, including: ` tax recordkeeping; ` filing requirements and due dates; ` the Taxpayer Bill of Rights; ` eligibility for various deductions and credits; ` tax provisions of the Affordable Care Act; ` worker classification; ` identity theft; ` innocent spouse relief;` the audit and appeals process; or ` collection alternatives.

 

What else do Low Income Taxpayer Clinics (LITCs) do?

LITCs are responsible for creating, printing, and distributing the materials used to educate taxpayers. Materials should be prepared in languages appropriate for ESL taxpayers. LITCs are also encouraged to provide education to staff, volunteers, and other tax practitioners on issues impacting low income taxpayers. Offering presentations that award Continuing Professional Education (CPE) or Continuing Legal Education (CLE) credits can be a valuable tool for recruiting clinic volunteers.

 

Information for Taxpayers Seeking LITC Services

If you are a low income taxpayer who needs assistance in resolving a tax dispute with the IRS and you cannot afford representation, or if you speak English as a second language and need help understanding your taxpayer rights and responsibilities, you may qualify for help from a Low Income Taxpayer Clinic (LITC) that provides free or low cost assistance.

 

Workshops for low-income taxpayers

Workshops for low-income taxpayers represent and help low income taxpayers before the internal revenue service (IRS, for its acronym in English) in audits, appeals and collection disputes. Also, the LITC help taxpayers respond notices from the IRS and to correct problems in the accounts. If you are a low-income taxpayer and cannot pay the services of a professional who represent you or if speaks English as a second language  and need help understanding your rights and responsibilities as a contributor, perhaps may qualify for assistance that provide the LITC free of charge or for a charge nominal.

 

Qualifying for Workshops for low-income taxpayers

Based on the levels of poverty that the Department of health and human services (HHS) publishes annually, each Workshop decides if you are eligible of income, besides if meets other criteria, before representing you. In general, income from taxpayers who are entitled to receive these services, can not exceed more than 250 percent of poverty levels.

 

Income Limits for Low Income Taxpayer Clinic (LITC) Help

 Income Ceiling (250% of Poverty Guidelines)
Size of Family  48 Contiguous States,
Puerto Rico, and D.C.
 Alaska  Hawaii

 1

 $29,425 $36,800  $33,875

 2

$39,825     $49,800  $45,825

 3

 $50,225     $62,800  $57,775

 4

 $60,625     $75,800  $69,725

 5

 $71,025     $88,800  $81,675

 6

 $81,425     $101,800  $93,625

 7

 $91,825   $114,800  $105,575

 8

               $102,225   $127,800  $117,525

 For each additional person, add

 $10,400     $13,000  $11,950

 

LITC and Helping Taxpayers File Taxes

Although the LITC receive from the IRS partial funding, the LITC, employees and volunteers, are completely independent from the IRS. The list below lists the LITC that receive federal funds for the calendar year of 2015. These workshops are operated by organizations of non-profit or academic institutions. Instead of an LITC low income taxpayers could perhaps receive help from a system of referred operated by state bar associations, societies of accountants or registered agents local or State or other professional organization of non-profit taxes. This publication is not a recommendation by the IRS for taxpayers to hire a workshop for low-income taxpayers or other similar organization to represent you before the IRS. The decision to obtain representation will not result in the IRS granted preferential treatment to treat the problem or dispute of the taxpayer. The contact details of the workshops may change, so is that please check the information more

Borrowing and selling assets to pay IRS taxes

Borrowing and selling assets to pay taxes. If the Notice of Federal Tax Lien is filed, this is more complicated, so I want to discuss discharges and subordinations.

 

Selling Assets to Pay Taxes

Let’s start by discussing selling assets. If the proceeds are enough to full pay, call the centralized lien unit at the number on the slide; 1-800-913-6050, and request pay off. When the sale goes through, the proceeds should be submitted to the IRS to pay the debt. When the proceeds are not enough to pay the tax due, apply for a discharge. This removes a specific property from the effects of the Notice of Federal Tax Lien, and the sale is not going to go through without a discharge.

Federal Tax Lien and Discharge of Debt

Discharges are governed by Internal Revenue Code section 6325(b), and there’s several subsections and categories within that. But I want to point out a couple that I think would be interesting to you. Section 6325(b)(2)(A) states that the IRS may discharge property for partial payment of a tax liability and for no less than the government’s interest in that property. Also, the taxpayer’s interest is divested after the sale

 

IRS Liens

Also, I wanted to point out Section 6325(b)(2)(B), which states the government may discharge a property if the interest is zero. For example, in a short sale when a mortgage is ahead of the Notice of Federal Tax Lien in the claim priority and the mortgage is more than the property value. That means there’s no interest for the lien, but allowing the short sale to go through may improve the cash flow of the taxpayer, thereby increasing the taxpayer’s ability to pay (then they can pay the taxes that they owe).

 

Notice of Federal Tax Lief Filed

If the taxpayer can sell an asset to pay part of the tax and the Notice of Federal Tax Lien is filed, get Publication 783, How to Prepare an Application for Certificate of Discharge of Federal Tax Lien, and get Form 14135, Application for Certificate of Discharge of the Federal Tax Lien. Use the same publication and form if the taxpayer is upside down on property and selling can help improve cash flow.

 

Borrowing in the face of the Notice of Federal Tax Lien

Now, let’s talk through borrowing in the face of the Notice of Federal Tax Lien. If the amount of the loan is not enough to full pay, you are going to need a subordination. This is the process allowing a lender to step ahead of the IRS’ lien position and makes it easier to get a loan or a mortgage. It doesn’t invalidate the Notice of Federal Tax Lien or the underlying statutory tax lien. Subordination is described in Internal Revenue Code section 6325(d). Section 6325(d)(1) states the IRS may subordinate if the government receives an amount equal to our interest or the interest to be subordinated.

 

Paying Federal Tax Lien

For example, when refinancing a mortgage to pay off a tax liability: as long as the IRS receives the government’s interest, we will likely facilitate the refinance by subordinating interest to the new lender. Under section 6325(d)(2), IRS may subordinate if as a result the property value increases facilitating collection of the liability. For example, let’s say the taxpayer owns a piece of property that can’t be sold in its current condition. But if they get a loan and rehabilitate the property, they can sell it and pay off either part or all of the tax. Then we’d likely subordinate the Notice of Federal Tax Lien to the lender.

 

Using Accounts Receivable as IRS Collateral

One last comment on assets: we tend to think of them as real or personal property, but keep in mind, especially for businesses, assets that can be used as collateral are accounts receivable. So, if the Notice of Federal Tax Lien is filed, it will attach to those accounts receivable, and just like with tangible property when getting a loan, you’re going to need a subordination. When seeking a subordination use Publication 784, How to Prepare an Application for Certificate of Subordination.

 

Discharge Federal Tax Lien

Remember when selling an asset or getting a loan, find out if the taxpayer has the Notice of Federal Tax Lien filed. If they are going to get a loan to pay off their debt, then you’re going to need to start the discharge and subordination process. Make sure that you remember that it takes at least 30 to 45 days to process a request for discharge and subordination; often, it takes much longer. People who submit their applications too close to the sale or the closing of a loan often find that the sale or closing doesn’t go through because there wasn’t enough time to process the discharge or the subordination.