By Dave Horwedel, EA and CEO of GuardDog Tax and Torchlight Tax
If you failed to keep up with your IRS payment agreement, you likely received a CP521 notice in the mail. This notice tells you officially that you defaulted on your installment agreement.
It also tells you how much money you still owe, the date the IRS declares that you must remit payment in full, and any penalties or cancellation terms for the agreement.
Of course, if you defaulted on your agreement, chances are you do not have the funds to pay the IRS in full.
Any tax liens, bank levies, wage garnishment or asset seizures that were held in check by the installment agreement are no longer held back.
Your income, home, savings, and good credit are all at risk.
Action should be taken. But how imminent is the threat? The answer this question depends on the exact circumstance of your situation.
This would be an ideal time to have an EA, CPA, or Tax Attorney with specialized knowledge and experience in IRS Representation, such as those at GuardDog and Torchlight Tax, review your case. Starting with a free consultation, we could work out the urgency of action required.
Now, if you are broke and cannot afford to pay for IRS Representation, you should call the IRS. If you really cannot pay them, you might be able to get Currently Not Collectible (CNC) Status. This would remove any immediate threat if achieved.
A new payment plan approved by the IRS would also eliminate the immediate threat.
You might even be able to get an Offer in Compromise (OIC) approved. This is a much longer task and requires a lot of painstaking paperwork. If you can get the CNC or a payment plan approved, then you may have time to learn how to do an OIC.
Most taxpayers get overwhelmed trying to do an OIC.
The OIC submission requires an application fee and 20% down payment on your offer amount. This submission once received and coded into the IRS system STOPs all IRS enforced collections actions. The OIC usually takes 6-12 months.
Many people think the best time to negotiate with the IRS is when you can at least pay them something. Actually, the best time to negotiate with the IRS is when you cannot pay them.
The IRS can generally be relied upon to tell you that you owe tax. They cannot be relied upon to tell you what options exist to avoid or minimize your tax liability or payments.
For this reason, you either need to bone up on tax law, rules, and regulations, or seek out a tax professional you can trust.
Just as you would not go to criminal court and face the police and District Attorney without a trusted lawyer, a wise taxpayer, dealing with tax matters he is not expert in, hires an Enrolled Agent (the highest federal tax credential) or Tax Lawyer to represent him before the IRS.
Call 1-877-758-7797 for a free consultation.