What to Do When You Owe Taxes to the IRS
As seen on WCPO Channel 9 Cincinnati

William E. Hesch

What to Do When You Owe Taxes to the IRS

May 23, 2009

Problem – Many taxpayers owe money to the IRS for back taxes and do not know what to do.

1) If the taxpayer cannot borrow the money from family, friends or the bank, then the first step is to contact the IRS and explain the situation.  The more money that is owed, the greater the need to seek the professional assistance of a CPA or attorney.

2) IRS may request you to prepare Collection Information Statements

              A. Form 433-A for Wage Earners and Self-Employed Individuals

              B. Form 433-B for Businesses

3) The IRS and your professional adviser – CPA or attorney will then evaluate your options.

              A. Monthly Payments through an Installment Agreement

B. Taxpayer may qualify for a Temporary Delay and not be required to make payments if your case is considered hardship.

C. An Offer and Compromise may be allowed by the IRS if there can be shown doubt as to liability or doubt as to collectibility or to promote effective tax administration. There are three types of offers:

              1. Lump Sum Cash

              2. Short Term Periodic

              3. Deferred Periodic Payments

The rules are very complex in working with the IRS.  IRS Publication 594 outlines in detail the entire IRS Collection Process. If a taxpayer has not filed prior year tax returns or if the amounts owed are significant, then the taxpayer should seek the assistance of a CPA or an attorney knowledgeable in working with the IRS.