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Options to Handle Your IRS Debt if You Cannot Pay It in Full

Tax Relief with Timalyn Bowens

Release Date: 01/26/2024

Why Am I Being Selected for an Audit? show art Why Am I Being Selected for an Audit?

Tax Relief with Timalyn Bowens

Episode 62: In this episode, Timalyn explains why the IRS selects certain taxpayers for audits and reassures listeners that being chosen does not automatically mean anything is wrong. Following up on last week’s episode, , Timalyn continues her audit series by breaking down how audit selections are made and why it is important not to panic if you receive an IRS notice. Contrary to common fears, receiving an audit notice does not mean jail time or that you did something wrong. Many audits are selected at random or flagged through a computer system that looks for unusual patterns or...

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What is an IRS Audit? show art What is an IRS Audit?

Tax Relief with Timalyn Bowens

Episode 61: In this episode, Timalyn breaks down one of the most misunderstood topics in tax: the IRS audit. After 60+ episodes of educating taxpayers, she’s kicking off a brand-new series that explores what an audit really means — and what it doesn’t. Many people fear a suit-wearing IRS agent knocking at their door, but as Timalyn explains, that’s highly unlikely. Instead, most audits today are conducted through correspondence and notices, not surprise visits. So, what is an audit? An IRS audit is simply a review or examination of your accounts and financial information to ensure you...

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Your Right to Appeal IRS Decisions show art Your Right to Appeal IRS Decisions

Tax Relief with Timalyn Bowens

Episode 60: In this episode, Timalyn explains your right to appeal unfair IRS decisions and why you shouldn't give up. We are celebrating three years and 60 episodes of the Tax Relief with Timalyn Bowens podcast! Provisions from the 2017 Tax Cuts and Jobs Act are set to expire in December, and many taxpayers are worried about IRS mistakes - especially after recent budget cuts and workforce reductions. Does this mean you have to accept wrongful IRS decisions? Timalyn says absolutely not. She explains that the IRS has an Independent Office of Appeals that provides fair, impartial review of...

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Is the IRS Going Away? show art Is the IRS Going Away?

Tax Relief with Timalyn Bowens

Episode 59: In this episode, Timalyn addresses whether or not the IRS is here to stay. We have seen significant changes at the IRS within the past few months as they went through a work force reduction. We have also seen them lose $40 billion of the $80 billion that was promised to them in funding by the Biden Administration. Does this mean that they are going to go bye bye? Timalyn doesn't believe so. She believes that this smaller force will make it more difficult for taxpayers to handle their IRS issues on their own. She also fears that some taxpayers will receive unfair treatment, as well...

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How Long Do You Have to Pay Taxes? show art How Long Do You Have to Pay Taxes?

Tax Relief with Timalyn Bowens

Episode 58: In this episode, Timalyn explains how much time you have to pay your tax bill and how much time the IRS legally has to collect.  Your tax balance is due on the due date of the return. However, when the IRS sends you a will give you 30 days to pay before the IRS uses any enforcement. This includes things like an or .  If you can pay the debt off within 180 days you may qualify for a short-term installment agreement. This agreement can be arranged using your online IRS.gov account to set up an online payment agreement (OPA). If the amount is over $50,000 you will have to...

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Why Do I Owe Taxes This Year? show art Why Do I Owe Taxes This Year?

Tax Relief with Timalyn Bowens

Episode 57:  In this episode, Timalyn explains the reason you likely owe taxes this year. She highlights 5 common reasons that people owe each year. It is ultimately the responsibility of the taxpayer to ensure that they are withholding enough taxes. The top 2 reasons that people owe the IRS is because their withholding and/or estimated tax payments are off.  Timalyn has created a series on her YouTube channel to walk you through the process of correcting your withholding for a W-2 job, pension, or your social security. You can find this series below. If you are self-employed or...

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What If I Can't Pay My Taxes? show art What If I Can't Pay My Taxes?

Tax Relief with Timalyn Bowens

Episode 56:  In this episode, Timalyn explains that all hope is not lost if you can't pay your taxes in full. You do have options! First, take a deep breath! Make sure that you have your tax return filed on time. This will help you avoid any additional penalties, such as the .  Payment Arrangments You may qualify to pay your balance over time. If you owe less than $50,000 and have been tax compliant you may qualify to set up an OPA yourself using the IRS website. An OPA is an .  If the balance is $10,000 or less and you haven't owed in the past 3 years or defaulted on an...

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The Failure to File Penalty show art The Failure to File Penalty

Tax Relief with Timalyn Bowens

Episode 55:  In this episode, Timalyn explains what the failure to file penalty is and why it is adding so much to your tax bill. She will not only talk about what it is but how it's calculated, and how to potentially get it removed. Can't File Your Taxes On Time? You can avoid the failure-to-file penalty by filing a timely tax return or tax extension. If you're an individual needing to file an extension you can do so by filing Form 4868. Timalyn will have a video to walk you through filing the 2024 4868 on her YouTube channel, coming out on March 31st.   The Failure to File...

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Is Unemployment Taxable? show art Is Unemployment Taxable?

Tax Relief with Timalyn Bowens

In Episode 54 Timalyn discusses unemployment tax and how it affects a taxpayer's tax liability.  Some forms of unemployment are not taxable such as workers compensation.  The topics covered in this episode are:   What is unemployment? Is unemployment taxable? What's workers compensation? How is unemployment reported? What is Form 1099-G?   If you'd like to work with Timalyn directly, you can book a call with her at www.Bowenstaxsolutions.com .  As we conclude Episode 54, we’d like to encourage you to connect with Timalyn on social media. You’ll be able to...

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Is Severance Pay Taxable? show art Is Severance Pay Taxable?

Tax Relief with Timalyn Bowens

In this episode, Timalyn discusses severance pay and the tax implications of receiving a severance package. She breaks it into 3 sections:    What is severance pay? Is severance pay taxable? Why is my severance pay taxed at a higher rate? How to lower the taxes on your severance pay. If you are already facing a tax debt that you can't pay in full Timayn mentions episode 18 - as a resource for you to use to stop the IRS from using enforcement such as tax levies to collect from you.  If you'd like to work with Timalyn directly you can book a call with her at . As we conclude...

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More Episodes

Episode 46:  In this episode, Timalyn discusses 4 various options you have to handle your IRS debt, if you cannot pay it in full.  While you need to pay your tax debt, there are ways to do it so that you’re not overly burdened.  In addition to the lump sum payment, she’ll explain the offer in compromise, installment agreements, currently not collectible status, and bankruptcy. 

Have You Received an IRS CP504 Notice?

If this is a letter you’ve already received, then you know the IRS is notifying you of their intent to levy.  The reality is you’re now in a tough situation.  While you haven’t been able to pay your tax debt, you most likely haven’t communicated with the IRS about your particular situation.  Now, the IRS is going to have the right to access your bank account(s) and decide how much they are going to take. 

The Offer in Compromise

You’ve probably heard about commercials claiming you can settle your tax debt for pennies on the dollar.  In reality, many people won’t qualify for this option.  This is sometimes referred to as the Fresh Start Program, which was implemented by Congress.  However, the Fresh Start Program isn’t just about the Offer in Compromise.   

There are ways to qualify for the Offer in Compromise.  You may be able to claim the debt doesn’t actually belong to you.  This is “Doubt as to Liability.”  Unfortunately, this may be very difficult to prove.  “Debt as to Collectability” means the IRS probably won’t be able to collect the debt from you.  “Effective Tax Administration” is another claim you may be able to use to qualify.

The IRS has a pre-qualifier tool on its website, so you can see if you might be able to qualify for the Offer in Compromise resolution.  In Episodes 39 and 40, Timalyn discussed IRS Form 433-F.  By completing this form, you’ll have a good idea of whether you’d qualify for the Offer in Compromise option.  The form will help to prove your ability to pay or lack thereof. It also takes into consideration your health, age and education.  These are factors the IRS will use to determine if you qualify. 

Any offer you make will have to include a certain percentage of the equity you have in specific assets.  If you have a lot of equity in your home or other assets (including your retirement portfolio), the IRS could require you to sell one or more of the assets to create funds available to pay your tax debt.  So, if that’s your situation, the Offer in Compromise might not be the preferred option for you. 

It’s important for you to consider working with a qualified professional who will help you to best represent your situation to the IRS. 

Installment Agreements

Timalyn discussed this option in Episode 10.  These are generally various payment plans you can have with the IRS.  There are 3 popular options:  Streamlined, Regular and Partial Pay.  Timalyn prefers the Partial Pay Installment Agreement because it looks at your assets, but focuses on your income and your expenses.  Assuming you can’t pay off your tax debt before the Collection Status Expiration Date (CSED), the IRS will still want as much as they can get from you. 

Establishing an installment agreement may be a good option, based on your specific situation. 

Currently Not Collectable Status

Timalyn explains that this option temporarily puts your tax account on hold.  You’ll still complete the IRS Form 433 to prove that you really have nothing left after calculating your income and deducting the allowable expenses. 

The IRS cannot put you in a financial hardship to pay your taxes.  There may be a difference in what you consider a necessary expense and what the IRS considers.  These would include your rent/mortgage and monthly car payment. 

Now, this does not mean you never have to pay the tax debt.  Interest will continue to accrue during the period of not collectable status.  But as Timalyn discussed, the IRS only has the option of collecting the debt before the CSED.  The IRS will not levy you during the Currently Not Collectable (CNC) period. 

Once the period has passed, the IRS can require you to submit documentation to see if you should still qualify.  If this sounds like a good option for you, listen to Episode 18, where Timalyn explains how to temporarily put your tax account on hold.

Bankruptcy

Now, admittedly, this won’t be the right choice for everyone.  However, if you qualify, you can use this to eliminate certain types of debt.  Timalyn cannot provide legal advice about bankruptcy, because she is not an attorney.  She does have relationships with bankruptcy attorney to whom she can refer you, if you need this option.

There is a 3-year, 2-year and 240-day rule, you need to understand. You can’t have any fraud claims, no taxes related to a trust and no Substitute for Return (SFR) on your account.  The tax debt you’re trying to discharge must be at least 3 years old.  It must have been filed with the IRS for at least 2 years.  Additionally, no other tax assessments can have been made by the IRS during the past 240 days. 

Assuming you meet the above qualifications, that tax year is eligible for bankruptcy.  However, if there is a tax lien, even if you bankrupt the tax debt, you’ll still have to repay the amount covered by the lien. 

Again, this may not be the best option, but depending upon your situation, it may be the option you can use. 

Final Words of Advice

As Timalyn has advised in previous episodes, it’s important to remember to breathe.  She invites you to contact her to see if she would be able to represent you.  The majority of her clients come owing 6-figures or more to the IRS, they may be facing an audit or even worse, they are actively being levied by the IRS.  Don’t wait for that to happen to you. 

Please consider sharing this episode with your friends and family.  There are many people dealing with tax issues, and you may not know about it.  This information might be helpful to someone who really needs it.  After all, back taxes shouldn’t ruin their life either.

As we conclude Episode 46, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, Google Podcasts, and many other podcast platforms.   

Remember, Timalyn Bowens is America’s Favorite EA and she’s here to fill the tax literacy gap, one taxpayer at a time.  Thanks for listening to today’s episode.

For more information about tax relief options, visit https://www.Bowenstaxsolutions.com/ .

If you have any feedback, or suggestions for an upcoming episode topic, please submit them here:  https://www.americasfavoriteea.com/contact.

  

Disclaimer:  This podcast is for informational and educational purposes only.  It provides a framework and possible solutions for solving your tax problems, but it is not legally binding.  Please consult your tax professional regarding your specific tax situation.