What To Do When You Owe the IRS

It’s easy enough to figure out whether you need professional help in dealing with the IRS. Take the amount you owe and divide it by 72. If you can afford to pay that monthly amount, you don’t need my help or any other tax resolution professional. Just call them up and tell them you want to pay that amount. If they start asking for financial information, tell them it’s your understanding that as long as you can pay off your debt within 6 years you don’t have to provide any information and ask them to send you the paperwork.

If they persist in trying to get information, don’t take it personally. Their trained to get as much information out of you as they possibly can. Try patiently explaining to them that you researched this topic before you called and you don’t want to provide any information. Ask them again to send the paperwork. If that fails, hang up and call back. That’s the secret to getting what you want from the IRS. Patience.

There’s a new pilot program the IRS rolled out in September of this year allowing you to pay your balance over 84 months if you owe between $50,000 and $100,000. The rules are tighter for this group, but the main ingredients are the same. The IRS prefers direct debit or payroll deduction over having you send them a check every month. They charge $107 set up charge if you do direct debit or payroll deduction and $225 if you don’t.

If you owe more than $25,000 and are unwilling to use direct debit or payroll deduction, you can expect a Federal Tax Lien on your credit report until the balance is paid. The lien is “self-releasing” when paid, but you can request a formal release once it’s paid off.

Just call them up and tell them you want it released. If you prefer, they’ll send you a copy of the release and you can file it yourself. If you’d rather they pay for it, just tell them so. It may take a little longer, but you’re dealing with the IRS - everything takes a little longer.

There are those in my profession who believe that if you owe more than $10,000 you should seriously consider professional help. There are a lot of slips and tricks that you simply can’t know if you don’t do this for a living. In my own practice, I often find the self-employed have an indomitable desire to do things for themselves. And while I don’t always encourage it, I do admire it.

You can bypass the phone call and fill out the forms yourself online at irs.gov. However, the system isn’t designed to handle debt exceeding $100,000. For that, you’ll need to talk to a person. I’m not sure why anyone who owes the IRS more than $100,000 would want to handle it themselves, but there’s no reason why you can’t, so long as you remember the basics. And if you can’t afford to pay the IRS within 6 or 7 years, you really ought to consider retaining the services of a professional.

Kirby Ashley, EA

Licensed to Practice before the IRS