Tax Talk is here. Tax attorney Sean J. Norton will be answering your tax questions in an open mailbag. Send questions from our site and get the information you need. Just follow this link to send your question to Sean. For the benefit of all advocates in our network, we plan to post selected Mailbag Q and A's on the site. The person seeking advice from Sean will not be identified. If you do not want your question to be posted, please indicate that in your e-mail to Sean. He will answer your e-mail regardless.
Q. I was recently contacted by the IRS stating that I owe back taxes, penalties and interest in the amount of $5,400. I have set up arrangements to pay $100 each month. But this will take forever to pay off, is there any way I can make this go away sooner? Can I pay a one time payment at a much lower amount, please help me with this issue.
A. It sounds like you have a collections issue with the IRS. I would encourage you to contact a Low Income Tax Clinic in your area. See my recent post about how to contact a Tax Clinic near you; these clinics provide free service. I cannot give you specific advice on how to proceed. Each situation is unique, and I would need much more detail about your case to determine your most favorable options. In general, you may qualify for an Offer-In-Compromise or Currently-Non-Collectible Status (CNC). An Offer in Compromise sometimes allows you to offer a reduced amount of money to satisfy your federal tax debt. Find the forms for an offer in compromise here. Nina Olson, the National Taxpayer Advocate, also has a video describing an offer in compromise.
You also may qualify for Currently Not-Collectible (CNC) status. CNC status means that the IRS has determined that you fall within a hardship status and that it is unlikely that you will be able to afford to pay your tax debt. In order to qualify for this status, you should fill-out Form 433-A, Collection Information Statement. Make certain that you fill-out the form completely and accurately. The IRS allows you to use certain expense standards on this form. Access these standards on the IRS website here.
You can call IRS Collections at 800-829-7650 and ask to be placed into CNC Status. The Agent will generally take information from IRS 433-A or 433-F over the phone with you if your debt is not assigned to a local IRS office or not over $100,000. If you go into CNC Status, the IRS will stop any wage garnishment or bank levy. They will, however, generally issue a notice of federal tax lien if your debt is over $10,000. This could negatively effect your credit and may attach to real property that you own. Again, you should talk to a Low Income Tax Clinic and they will help you sort through all of your options.
Q. Sean, I'm a Vietnam combat Vet with a 70% VA disability for PTSD. I've been self-employed for years. I have not filed tax returns in a number of years. I've basically been a homeless vet since getting divorced again in 2006. The IRS notified me recently that they have filed tax returns for me and have told me that I owe them money for a number of years. What should I do?
A. Dear Veteran, First, thank you for your service to our country in Vietnam. I think you should contact a Low Income Taxpayer Clinic in your area. Low Income Taxpayer Clinics assist taxpayers who are having problems with the IRS. The assistance is free. In order to qualify for assistance, your household income must fall at or below 250% of the poverty guideline . Go here for the IRS listing of Low Income Taxpayer Clinics and income eligibility guidelines. Make sure you call a clinic that is designated as a “B” or “C” on the chart. Clinics with an “E” designation only provide educational information.