A Review of New Mexico State Tax Payment Plans

New Mexican Taxpayers who owe the state taxes and can’t pay in full may want to consider a tax payment plan with the Taxation and Revenue Department (TRD). Taxpayers who set up a payment plan with the TRD can avoid enforced collection activities such as levies or seizures in most cases. However, if a business taxpayer defaults, TRD can seize business assets and close the business. If individual taxpayer defaults on a payment agreement, TRD can also seize assets including motor vehicles.

Coronavirus Relief

For personal income taxes, the TRD is giving taxpayers until April 15th, 2021 to pay any 2019 tax liabilities in full without penalties or interest. They do not need to set up a payment plan online.  Taxpayers only need to satisfy their balance by April 15th, 2021. They can achieve this by making payments online using their social security number or by mailing payments. For tax balances for years older than 2019, they can set up a payment plan online.

Two Types of Payment Plans Offered by the NM’s TRD

New Mexico’s TRD offers two types of payment plans for taxpayers that cannot pay off their tax balance in full.

Short-Term Payment Plan

A short-term payment plan is for taxpayers who need only 12 months or less to pay off the tax liability. The benefit of setting up this type of payment plan, besides paying less over time in interest, is that the TRD will not file a lien if the taxpayer chooses this type of payment plan.

Installment Agreement

An Installment Agreement is a formal written agreement that is entered into between the taxpayer and the TRD. Installment Agreements are for longer periods of time and can be entered into a plan up to 72 months. All installment agreements must be secured by a lien or other acceptable security under state law in order to be granted by the TRD. Additionally, taxpayers should be aware that pursuant to state law, by entering into a payment plan with the TRD, they waive all rights to appeal the validity of the liability in the future.

NM State Tax Payment Plan Terms

The TRD offers flexible monthly payment terms for both types of payment plans. Taxpayers can set up equal or fluctuating monthly payments, or payment amounts that increase over the term of the agreement. In most cases, the TRD will request financial information from the taxpayer when requesting an Installment Agreement.

How to Setup a New Mexico State Tax Payment Plan

The TRD offers many options for taxpayers to set up a payment plan for past due taxes.

Self-Service Option

The TRD recently allowed taxpayers to create a payment plan for tax balance, including penalties and interest. Taxpayers can select their down payment and the duration of their plan up to 72 months. Some taxpayers will have their payment plan approved automatically, while others will be contacted by the TRD to complete the process. Taxpayers can log into their online account at tap.state.nm.us/TAP/  and will see options to set up a payment plan once logged in.

Setup Appointment at District Office

Taxpayers can also set up a payment plan by also visiting a District Office. Taxpayers can call the Santa Fe District (505-827-0920) or the Albuquerque District (505-841-6262) to set up an appointment.

Call the Taxation and Revenue Department

Taxpayers can also set up a payment plan by calling the TRD directly. However, it is best to set up a payment plan online. The toll-free number is 1-866-285-2996 or taxpayers can call the general line at 505-827-0700.

Defaulting on a Tax Payment Plan

If a taxpayer misses a payment, makes payments late, does not file tax returns on time, or creates new liabilities, the TRD will send the taxpayer a Delinquent Agreement Letter. If the taxpayer fails to respond or contact the TRD after receiving this letter, the TRD will send a Defaulted Agreement Letter. Next, the TRD could pursue enforced collection actions.

In Closing

Taxpayers who cannot pay off their tax bill in full can set up one of two payment plans. The payment plan will help the taxpayer stay in compliance with the TRD. As a result, taxpayers can avoid seizures, levies, and other enforcement actions. The TRD has suspended certain enforcement collection actions until the end of August 2020. Moreover, for taxpayers with 2019 tax balances who filed on time or who filed an extension, they can submit payments online or mail payments. The benefit here is there is no consequence of interest and penalties until after April 15th, 2021. For those taxpayers with tax balances from before the 2019 tax year, they can set up a payment plan online, by phone, or by visiting a district office (by appointment only).

If a taxpayer cannot afford to make monthly payments, they should work with a licensed tax professional and consider other options. Follow this link to find experienced tax professionals who have resolved tax problems with New Mexico's Taxation and Revenue Department, or start your search below.

Disclaimer

Reading this article does not create an attorney-client relationship. This article should not be used as a substitute for the advice of a competent attorney or tax professional admitted or authorized to practice in your jurisdiction.

Overview of Indiana’s State Tax Payment Plan

Unable to pay an Indiana state tax bill in full? Just like the Internal Revenue Service, Indiana’s Department of Revenue (DOR) offers taxpayers who cannot pay their state taxes in full the ability to pay it off over time. Generally, taxpayers who qualify with the DOR’s guidelines can pay their taxes off over a series of monthly payments. We discuss details below such as payment plan durations, requirements, and other considerations.

Payment Plan Durations

Individual Payment Plan

Indiana’s DOR offers payment plan durations that vary based on the amount the taxpayer owes. Below you will find a breakdown of how durations change depending on the tax balance. Keep in mind before the Covid-19 crisis, Indiana’s DOR allowed payment plans from 12-36 months generally and the taxpayer had to have a balance over $100. However, because of the Covid-19 pandemic, they have relaxed the general guidelines whereby under special circumstances taxpayers can obtain payment plans if they owe under $100 dollars up to 4 months. Moreover, they extended the payment plan durations based on the tax balance up to 60 months. The chart below gives some details.

Indiana Individual Income Tax Payment Plan Duration By Tax Balance

If a taxpayer owes less than $100 and wants a payment plan, they will have to call the DOR directly at 317-232-2165

Business Tax Payment Plan

Businesses can also set up tax payment plans with Indiana’s DOR. Just like individual tax payment plans, the amount owed generally determines the duration of the tax payment plan.

Indiana Business Tax Payment Plan Duration By Tax Balance

Penalties Associated With Payment Plans

Indiana’s DOR will still assess a 10% percent penalty on the unpaid balance during the life of the payment plan. Furthermore, they will tack on interest as well. Therefore, if a taxpayer can pay off the entire balance in full without setting up a payment plan, this can result in the avoidance of interest and penalties. Taxpayers can also reduce penalties and interest by paying more than their minimum monthly payment amount (if they can).  Taxpayers need to weigh all options including receiving a personal loan from a bank, refinancing their mortgage with cash out along with other options to determine the most inexpensive way to pay off their taxes.

How to Apply for an Indiana Tax Payment Plan

Taxpayers can set up a state tax payment plan with Indiana’s DOR in a variety of ways. Taxpayers can request a payment plan is by leveraging Indiana DOR’s website call INtax Pay or by calling the DOR.  Individuals with income taxes and businesses who conduct retail sales can leverage the website. However, if a taxpayer owes less than $100 dollars, they cannot use the website and must call DOR at 317-232-2165. Taxpayers can select the day of the month they want to make a payment with their plan.

Because of policy changes in 2018, Indiana’s DOR provides more flexibility for individuals looking to set up a payment plan with little or no down payment. Unlike some other states, taxpayers need to login into their INtax Pay account each month and make a payment as the department does not do automatic payments.

If You Cannot Make Monthly Payments

If the taxpayer cannot make minimum monthly payments with a tax payment plan, he or she may want to look at Indiana’s Hardship Program, an Offer in Compromise, or some other type of resolution. With a large tax balance, working with a licensed tax professional can ensure optimal results.

If a taxpayer starts a tax payment plan and misses a payment, Indiana’s DOR will most likely cancel the payment plan and refer the case to an outside collection agency. If you miss a payment or foresee yourself having trouble making a monthly payment, call the DOR immediately.

Future Refunds

Taxpayers need to understand that DOR can seize any federal or state tax refunds due to the taxpayer and apply it to any tax balance they have with the state. If a refund covers the entire balance on the payment plan, then the payment plan will come to an end. Otherwise, the balance simply gets reduced and the taxpayer needs to continue making payments.

When in doubt, reach out to a tax professional that has experience in resolving cases with Indiana's Department of Revenue. You can find a list here, or you can start your search below. 

Disclaimer: The content on this website is for educational purposes only and does not serve as legal or tax advice. For specific help regarding your tax situation, contact a licensed tax professional or tax attorney.

Indiana State Offer In Compromise Overview & Details

Indiana’s Department of Revenue has a division called the Taxpayer Advocate Office (TAO). This office handles the Offer in Compromise program. The Offer in Compromise program provides taxpayers with the ability to settle their tax liabilities with the DOR for an amount less than what they owe. The financial condition of the taxpayer and their tax situation determine eligibility. In other words, if a taxpayer can pay in full, then they likely will not qualify. The Department of Revenue states that the taxpayer’s total taxes owed and their earnings potential are all factors in determining whether an offer is reasonable.

Eligibility Requirements

Indiana’s DOR provides three possible examples of taxpayers who may qualify for an Offer In Compromise:

• If the taxpayer encountered personal devastation due to a natural disaster or an economic event beyond their control
• If the taxpayer currently suffers from a significant sickness or an immediate family member does
• The taxpayer faces presently financial hardship or has financial problems

How to Apply for an Indiana OIC

Taxpayers who wish to file an Offer in Compromise must do so by filing Form FS-OIC, including all required attachments.  Alternatively, taxpayers can submit a copy of an IRS Offer in Compromise application along with supporting documentation. Moreover, if the taxpayer had an OIC approved by the IRS, they can submit the IRS OIC application with the required documentation. They will also need to send proof they had an IRS liability at the time they filed the OIC with the IRS and the letter of approval from the IRS.

Collections Halted Once You Apply?

The DOR will not suspend collection activities while DOR evaluates an Offer in Compromise application. The Indiana Department of Revenue will keep any levy proceeds before an Offer in Compromise acceptance. The DOR will not release any professional license, tax liens, or permits until the taxpayer pays the full offer amount for any accepted OIC.

OIC Requirements

The first requirement that taxpayers should ensure they meet before beginning the application is that they are current on all tax return filings. The DOR will automatically deny the OIC application if a taxpayer is currently delinquent on any individual or business tax filings. Moreover, the taxpayer cannot be in bankruptcy. In other words, all bankruptcy filings must be discharged or dismissed already.

Next, taxpayers must ensure that they attach all supporting documentation that is requested to be filed with Form FS-OIC. The list of these documents, if applicable to the taxpayer, is detailed on the Form FS-OIC. The DOR will automatically reject an application that is submitted without all of the required supporting documentation. Examples of accepted documents are:

• Income-related documents: paystubs, profit and loss statements, government benefit letters, pension statements, and bank statements
• Expense-related documents: utility statements, credit card or loan statements, car payment bills, medical bills, etc.
• Account-related documents: bank statements, retirement statements, investment statements, etc.

Lastly, the DOR requires that taxpayers attach a statement explaining their specific circumstances that resulted in the inability to pay the taxes. The DOR calls this a Letter of Circumstance. This letter should include all pertinent facts that were the result of the liability becoming assessed including:

• the reasons or extenuating circumstances preventing the full payment or the ability to pay monthly, such as financial hardships or medical diagnosis or treatments
• and how the taxpayer intends to pay the settlement offer (if accepted).

Where to Mail Your OIC Application & Documents

The DOR and the TAO state that they will review OIC applications within 15 to 20 days. They ask that taxpayers send completed applications to:

Office of the Taxpayer Advocate
Indiana Department of Revenue
P.O. Box 6155
Indianapolis, IN 46206-6155

The Offer Amount

The Taxpayer Advocate Office (TAO) will consider whether the offer amount made by the taxpayer is reasonable and in the best interest of the State. Again, the TAO will evaluate if the offer is the largest possible the taxpayer can put forth or by which can be collected realistically.

If the DOR Accepts the Offer

If Indiana’s DOR accepts the offer, the taxpayer must sign a “legal and binding Offer in Compromise Agreement.” Furthermore, the DOR will generally expect the taxpayer to pay the agreed-upon settlement amount in full within 60 days. However, in some circumstances, a payment plan will be authorized by the TAO. If a payment plan is allowed, the taxpayer will be required to make a 20% down payment. Once DOR accepts the Offer in Compromise, it is contingent on the taxpayer filing all tax returns and paying all taxes that become due in a timely fashion moving forward. If a taxpayer fails to do this, then the DOR will cancel the settlement agreement. Moreover,  it will reassess the original taxes owed, including back penalties, interest, and fees.

If a taxpayer does not qualify for an Offer in Compromise, the taxpayer or their representative can consider other tax resolution options. Above all, it is essential to work with a licensed tax professional when considering the Offer in Compromise option as the paperwork and process can be cumbersome. When in doubt, work with a licensed tax professional that has experience in resolving tax problems with Indiana's DOR.  You can find a list here, or you can start your search below. 

Disclaimer: The content on this website is for educational purposes only and does not serve as legal or tax advice. For specific help regarding your tax situation, contact a licensed tax professional or tax attorney.

A Review of Common Indiana State Back Taxes Options

The Indiana Department of Revenue (DOR) is responsible for the administration of the income taxes for the State. The DOR administers all facets of Indiana’s tax code. Furthermore, this includes handling tax resolution matters for individual and business taxpayers.

If a taxpayer has an unpaid tax liability with DOR, they offer various options in order to assist taxpayers in resolving tax liabilities.  For instance, options exist to set up a monthly payment or apply for a settlement through the Offer In Compromise program. Additionally, certain taxpayers may qualify for non-collection status (called currently not collectible by the IRS) or Innocent Spouse relief in the case of a married individual.

Below we will discuss these options (not an exhaustive list) with the state of Indiana. Throughout this article, we may provide practical tips. However, taxpayers should seek the advice of a qualified tax professional.

Tax Payment Plan

The DOR will allow taxpayers to set up a monthly tax payment plan to pay their tax liability over time. However, the DOR requires that taxpayers have a balance greater than $100. Payment plan durations may range from 4 to 60 months (generally 12-36 but changed because of Covid-19). Some downsides exist when taxpayers set up a payment plan.  The DOR will assess an additional 10% penalty on the balance of the liability plus interest. They will continue until the taxpayer’s satisfied the entire balance. Therefore, some taxpayers may want to consider other options. This is true for those who are able to pay the balance in full or are able to secure outside financing to pay in full. We discuss Indiana tax payment plans here.

Offer In Compromise

The DOR has a division called the Taxpayer Advocate Office (TAO) that administers the Offer in Compromise (OIC) program. The TAO states that their office addresses complex and special tax problems.

An Offer In Compromise is a program where taxpayers may offer to settle their taxes owed with the DOR for an amount less than their tax balance. Generally, these taxpayers qualify based on their current financial status. Therefore, taxpayers with the ability to pay in full or make monthly payments rarely will qualify. Specifically, the DOR states that the taxpayer must make a reasonable offer based on their total liability and their earnings potential.

You can read more about an Indiana Offer in Compromise program here.

Hardship/Not Collectible

The TAO administers a program that allows taxpayers who are suffering from financial or medical situations. More specifically, they allow taxpayers to set up special low monthly payments or to postpone making payments for a period of time. This program is called the Hardship Program.

In order for a taxpayer to be considered eligible for the hardship program one of the following must apply:

• The outstanding taxes threatens the taxpayer’s livelihood
• A terminal illness or disability has fallen on the taxpayer or an immediate family member of the taxpayer
• The taxpayer has experienced recent personal devastation resulting from a natural disaster or uncontrollable event
• Due to recent unemployment or forced job change, the taxpayer faces financial hardship

Taxpayer’s who meet one the above-stated criteria should complete and file Form FS-H. The TAO will review the application and then determine an appropriate reasonable monthly payment plan or postponement of payments, given the specific circumstances. If accepted into the Hardship Program taxpayers should expect periodic reviews by the TAO of their financial or medical situation to determine if the Hardship Program is still necessary.

Hardship Requirements

Additional requirements of the Hardship Program include:

• being up to date on all current filing and payment obligations
• and to maintain compliance moving forward.

If the taxpayer files a tax return or makes a payment late, the Hardship Program payment plan or deferral may be canceled and normal collection activities will resume.

Taxpayers should be aware that this program is a temporary solution for resolving unpaid taxes. In other words, the Hardship Program will not cancel, discharge, or settle the taxes. Nor will the Hardship Program put a hold on the account indefinitely, or stop or reverse collection actions that have occurred prior to acceptance into the program.

The DOR and the TAO state that they will review Hardship applications within 15 to 20 days. They ask that taxpayers (or their representatives) mail completed applications to:

Office of the Taxpayer Advocate
Indiana Department of Revenue
P.O. Box 6155
Indianapolis, IN 46206-6155

Innocent Spouse

In certain situations, a spouse on a jointly filed tax return may be held not liable for taxes. The IRS and the DOR recognize this principle of Innocent Spouse Relief.

The DOR will consider granting Innocent Spouse Relief in any of the following situations:

• The IRS determined that the taxpayer is entitled to Innocent Spouse relief for the same tax year
• Income was not reported on the tax return, and the innocent spouse was unaware or had no access or use of that income
• Income was earned and the innocent spouse had no compensation from this income and the innocent spouse thought all taxes had been filed and paid
• All of the income reported was the spouse’s income and the innocent spouse filed and paid the tax that was due

If a taxpayer meets one of the above criteria they should file Form IN-40SP. The DOR asks that taxpayers mail Innocent Spouse Relief requests to:

Indiana Department of Revenue
Returns Processing and Operations
P.O. Box 7207
Indianapolis, IN 46207
Or, Fax to 317-615-2697

Tax Liens or Warrants

If a tax liability becomes past due, the DOR will send two preliminary collection notices to the taxpayer before it becomes collection actions. The first collection action that the DOR will initiate is to file for a tax warrant with the County Clerk of the taxpayer’s resident county. Subsequently, after registration of the tax warrant, the DOR will send the warrant to the County Sheriff to begin enforced collection efforts.

Taxpayers should not confuse a tax warrant with a warrant for arrest. The collection actions that the Sheriff might take under the authority of the tax warrant include auctioning properties, garnishing wages, and/or levying bank accounts. If the Sherriff cannot collect the taxes owed after 120 days, the DOR will usually then send it to an outside collection agency.

Additionally, any taxpayer who has an outstanding tax liability and has had a tax warrant filed in the county clerk’s office will also have DOR tax liens placed on all vehicle titles that are in the taxpayer’s name.

Failure to File and Pay Penalties

The failure to file a tax return and failure to pay tax penalties represent the main penalties that taxpayers should know about. The failure to file a tax return penalty equates to 20% of the tax to be shown on the return. Finally, the failure to pay tax penalty represents 10% of the unpaid tax liability or $5, whichever is greater.

Other Tax Resolutions

Challenge the Assessment

If the tax liability is the result of an assessment made by the DOR the taxpayer has 60 days from the date on the first notice issued to protest the amount due. The DOR names the first notice “A Proposed Assessment Bill (AR-80/NOPA).” If this does not resolve the matter the taxpayer may request a hearing by writing to the DOR legal division. If the protest is ultimately denied the taxpayer may appeal to the Indiana Tax Court.

Bankruptcy

Taxpayers may want to consider speaking to a bankruptcy attorney if they have significant personal liabilities in addition to their taxes. Generally, taxpayers can discharge some state tax liabilities through bankruptcy proceedings. However, taxpayers should seek the advice of an experienced tax and bankruptcy attorney if they believe this option is right for them.

The Indiana Tax Amnesty Program

In 2015, Indiana offered a “Tax Amnesty Program.” The program was available for individuals and businesses with unreported or underreported income tax. Consequently, tax Amnesty allowed these taxpayers to file any unfiled returns and/or pay any associated liabilities or underreported liabilities free of penalty, interest, and collection fees. Taxpayers currently can not apply for this program. However, delinquent taxpayers should take advantage of the program if it opens again in the future.

Practical Tips

Taxpayers should consider escalating contentious issues to a manager within the DOR. Generally, the authority and experience of a supervisor can help resolve problems. If, after speaking with a supervisor, the taxpayer still believes that he/she is not being heard, is being discriminated against or having their rights violated, or Indiana law is not being followed, they should contact the Taxpayer Advocate Office (TAO).

Indiana Taxpayer Advocate Office

In addition to other duties already discussed, the Taxpayer Advocate Office in Indiana serves to assist taxpayers with complex tax issues. The TAO can help you apply for hardship status or an offer in compromise. They can also assist you if you are an active duty service member materially affected by tax debt collection. Moreover, they protect taxpayers’ rights and help to ensure that the DOR fairly administers its programs and processes. The TAO is part of the DOR, but it works independently. If you need assistance from the Indiana tax advocate office, you can read this guide on the Indiana TAO.

Conclusion

Taxpayers should not ignore unsolved tax liabilities. In addition to the penalty, interest, and collection fees, reasonable outstanding tax balances can quickly balloon into crippling liabilities. Not to mention, taxpayers run the risk of having their assets seized and sold. Moreover, they can also face wage garnishments, and/or have their bank accounts levied. Therefore, taxpayers should address delinquent tax obligations as quickly as possible. Furthermore, they should seek help from a qualified licensed tax professional with experience in solving tax problems with Indiana's Department of Revenue. A tax professional can determine which course of action is most appropriate for their situation. Alternatively, you can find qualified tax professionals by doing a search below. 

IRS Certified Mail: Reasons Why You Receive These Letters

Opening the mail is rarely an exciting task but receiving the dreaded IRS certified mail can send even the calmest person into a frenzy. You may be asking yourself, why would the IRS send me a letter? People start mentally combing through their financial transactions trying to figure out what might be wrong. Others may head straight to the web to see if they might be receiving an IRS audit letter.

In reality, though, the IRS sends certified letters for many reasons. That letter could be an audit letter, but it could also be a letter asking for identity verification before the IRS releases a tax refund. Review these common reasons for receiving IRS certified mail.

What is IRS Certified Mail?

The IRS relies on the U.S. Postal Service to deliver mail to millions of Americans. Unfortunately, the mail isn’t always delivered, and sometimes it’s particularly time-sensitive and important. If problems aren’t addressed, the IRS will resort to sending certified letters.

IRS certified mail has these specific characteristics:

• Mailing receipt: Certified mail comes with a mailing receipt for the sender, in this case, the IRS. This mailing receipt is the first step in a tracking system that ensures a delivery to the intended recipient.
• Signature requirement: A certified letter isn’t left in someone’s mailbox. It requires a signature as a record of delivery and will be returned if not accepted by the intended recipient.
• Electronic delivery: The final component of IRS certified mail is electronic delivery tracking. The sender can review the delivery information online or over the phone.

What does it mean when you get a certified letter from the IRS? Certified letters are generally a last resort for the IRS. That means that, once someone starts receiving IRS certified mail, the IRS will be expecting a response within a reasonable amount of time. Failure to respond could result in serious consequences. 

7 Valid Types of IRS Certified Mail and Notices

There are many reasons the IRS might reach out to someone, but the most common reasons are related to outstanding balances and requests for more information. However, there are a few valid reasons someone might receive IRS certified mail.

1. Outstanding Balance

An unpaid tax balance is one frequent reason the IRS sends certified mail. The IRS sends standard mail when the collection process begins, but the process will escalate if the notices are ignored. The demand letter will include information on how to resolve the taxes owed with options like an offer in compromise or an installment agreement.

It’s important to contact the IRS immediately after receiving certified letters with a payment demand. This balance continues to accrue interest and penalties, and it will ultimately lead to a Notice of Federal Tax Lien, wage garnishment, bank levy, or some other type of forced collection actions.

2. Refund Discrepancy

Not all news from the IRS is bad news. Individuals and businesses that are expecting a tax refund can expect IRS-certified mail if there is a discrepancy in the return. This discrepancy could be a smaller or larger refund than anticipated, though it’s important to compare any new refund amounts with the original tax return.

Even if a certified letter is informing someone of a refund discrepancy, it’s important to read through the entire notice for any pertinent information. There may be additional steps to take to ensure the refund is processed.

3. Return Questions

Occasionally the IRS has questions about a tax return. If the questions aren’t time-sensitive or critical to processing a return, the IRS will send the request for information through standard mail. However, more critical requests will be sent as certified letters. The IRS will typically include any forms that need to be filled out, as well.

Common questions about tax returns include clarification about sources of income, discrepancies in the mailing address on file, and verification of tax credits and deductions. Delays in answering these questions will delay the refund process.

4. Identity Verification

The IRS takes identity protection seriously and will send certified letters when they need to verify someone’s information. This letter will include instructions on how to complete the identity verification process, and it will require valid forms of identification like the account numbers from a credit card or student loans.

There are other requirements to verify identity as well, such as a mobile phone number, income tax returns, filing status, and either a 5071C, 5747C, or 5447C letter. This process is usually time-sensitive and could delay refunds if not completed quickly.

5. Information Needed

Sometimes the IRS needs more information to process a tax return. There could be missing Form W-2 information or a mismatch in the employer information the IRS has on file. If the information is critical, the IRS will include directions for returning the requested information easily. This might be over the phone or through an online portal.

In some cases, taxpayers might receive an IRS audit letter. This certified letter will include directions for returning supporting documents and updating any other information. It will have a deadline too, so pay close attention to the dates.

6. Return Amendments

While not a formal audit, the IRS does occasionally need to make changes to a filed tax return. In these cases, the IRS will send a CP2000 letter. This letter will outline the changes and include directions for agreeing to or disputing the revisions. Supporting documentation might be necessary for anyone that disagrees with the changes.

These changes to a tax return are generally time-sensitive but they don’t require an amended return. The changes are critical to processing the return, so any delay in responding to the notice could further delay a tax refund.

7. Processing Delays

Processing delays are another reason the IRS sends certified mail. While they don’t send notices for general delays that impact everyone, they do send certified letters to people that are expecting a tax refund but could potentially owe other federal taxes. This notice is called the CP44 notice and it, unfortunately, doesn’t come with instructions.

IRS-certified mail for processing delays like this is a courtesy notification. Detailed information will follow once the IRS has determined whether the refund will be applied to a past-due tax balance or sent to the recipient.

Practical Tips for Handling IRS Certified Mail

It can be intimidating to receive IRS-certified mail. It’s not uncommon for people to put the letter aside without reading it so they can deal with the problem later. This can lead to anxiety over the contents of the letter.

Instead of letting anxiety fester, follow these practical tips for dealing with IRS notices:

• Read the entire letter carefully: Letters from the IRS include the type of and reason for the notice, detailed instructions on the next steps, and the most appropriate method of contact.
• Make note of important deadlines: If the IRS wants forms completed or supporting documentation, the certified letter will have a deadline and instructions for returning the information.
• Establish contact to prevent collections: Individuals with outstanding tax balances should establish contact with the IRS to prevent collection activities like additional letters and phone calls.
• Hire a Certified Tax Resolution Specialist: Some people have taxes owed that is almost unmanageable without professional help from certified tax experts.

The most important tip for handling IRS-certified mail is simply not to ignore it. Ignoring certified notices can lead to federal and state liens as well as the potential for wage garnishments.

Find a Tax Relief Solution & Getting Help Through TaxCure

Outstanding taxes can lead to significant financial consequences, such as the potential for levies and tax liens. Individuals and families that find themselves receiving IRS-certified mail for their tax liabilities should reach out to a licensed tax professional with IRS experience.

Tax relief solutions can help alleviate financial burdens that hold people back. A Tax Resolution Specialist has the skills and experience to negotiate the best settlement offers for any situation. Start your search for a tax professional below. Our network of tax professionals is made up of pros from around the country with a wide array of experience. At Taxcure, we have developed a unique ranking algorithm for professionals based upon a variety of factors to help taxpayers easily find a professional that is best equipped to help resolve their tax problems. Start below by selecting the agency you have a problem with and then use the filters to select your particular problem/problems to see the professionals with the most experience in those areas. 

The Internal Revenue Service (IRS) may be heading to your house. Recently, the agency announced plans to make in-person visits to high-income taxpayers who have not filed tax returns in 2018 or previous years. Are you worried about a knock on your door? Here is what you need to know. 

Taxpayers Who May Be Visited by the IRS

In the initial stages of the program, the IRS expects to visit about 800 taxpayers, and the agency is primarily targeting people who earn over $100,000 per year. If you are in this category, you should have already received numerous written notifications from the IRS. 

Although the IRS has not explicitly announced taxpayer profiles beyond the earning threshold noted above, most of the comments delivered to the media about this program have come from the IRS Small Business/Self Employed Division. By extension, you may be more likely to receive a house call if you own a business or are self-employed. 

IRS Employees Handling In-Person Visits

The IRS is sending revenue officers to handle these face-to-face visits. Revenue officers are civil enforcement agents who work for the IRS, focusing on compliance issues. They do not lead people away in handcuffs, and in fact, they don’t have any arresting power. 

Instead, revenue officers provide taxpayers with guidance on how to become compliant, and they also conduct interviews to collect financial information. As needed, they can refer cases to the IRS Criminal Investigation Division (CID).

Home Visits and Tax Scams

Unfortunately, some scam artists may try to take advantage of this program. If anyone comes to your door, ask for ID — IRS revenue officers should have two forms of ID with their photos and serial numbers. Keep in mind that revenue officers do not make threats or demand unusual types of payment. They also don’t bring up non-existent liabilities. 

For example, if someone comes to your home, doesn’t have an ID, and is trying to make you pay cash, they are a scam artist. Again, the IRS sends multiple letters before making these visits. If you have filed every year, don’t have unpaid taxes, and have not received any letters, you should not receive a visit from the IRS.

When Are IRS Home Visits Happening?

At the time of writing, the IRS plans to make home visits in February and March 2020, but the agency may decide to draw out the program. Some visits are scheduled, but many will be unannounced.

Reasons for IRS Home Visits

These home visits are intended to address the tax gap. This is the difference between the tax owed and the tax collected. On average, the tax gap is 15 to 18% of the country’s total tax liability, but only a portion of the gap is due to not filing returns. From 2008 to 2010, the tax gap was $458 billion, and $32 billion was due to non-filing. 

What Should You Do If You Have Not Filed Yet?

If you have unfiled tax returns for 2018 or previous years, reach out to a tax professional who can help you complete and file those returns. Even if you don’t have the funds to pay, filing is still better than not filing. The IRS has numerous payment plans and relief options for delinquent taxpayers. Depending on your situation, you may even be able to eliminate failure-to-file penalties if you file quickly and request penalty relief. 

Ideally, you should get into compliance before the agency finds you. Paul Mamo, Director of Collection Operations, Small Business/Self Employed Division, echoes this thought: “It is always worthwhile to take advantage of various methods of getting back into filing or payment compliance before being personally contacted by the IRS.”

Hank Kea, Director of Field Collection Operations, Small Business/Self Employed Division, also underscores the importance of taking care of delinquent returns: “Our continued use of ever-changing technologies, coupled with additional enforcement personnel, would suggest that waiting is not a viable option for delinquent taxpayers.”

To get help with unfiled returns, start with a free consultation today by calling 1-888-349-2116. We can connect you with a tax professional who can help you make the best decisions for your situation. Do not wait until the IRS knocks on your door — call today.  

Virginia State Tax Options for Those With Back Taxes

Taxpayers that owe back taxes in the State of Virginia are often subject to aggressive collection efforts. What many taxpayers do not realize is that there are options available to them when they owe VA back taxes. Furthermore, these options help them resolve tax liabilities and avoid collection. Options to satisfy back taxes in Virginia include:

• Paying the full amount of taxes due plus accrued interest and penalties
• Entering into a payment plan
• Requesting a Waiver of Penalty
• Requesting an Offer in Compromise and getting it accepted

We discuss some options (not an exhaustive list), including their advantages and disadvantages, in more detail below.

Who is Responsible for Collecting Taxes in the State of Virginia?

The Virginia Department of Taxation is the entity responsible for collecting taxes in the state. In the 2018 fiscal year, the Department of Taxation received some $20 billion in taxes from Virginia taxpayers. The total revenues comprise a wide array of taxes. These include but are not limited to, individual and corporate income taxes, estate tax, watercraft sales and use tax, cigarettes, and tax on many commodities.

The Department of Taxation is also the entity that will attempt to collect past due taxes. The Department’s initial collection efforts will consist of sending taxpayers a “Notice of Assessment.” A Notice of Assessment is nothing more than a tax bill. Taxpayers have 30 days from the receipt of the Notice to pay the full amount of the taxes due. If taxpayers fail to make payment within 30 days, the Department will begin to access penalties and interest on the unpaid balance. Moreover, the Department will likely commence a variety of collection actions.

Taxpayer Consequences for Failing to Pay VA Back Taxes

The Virginia Department of Taxation can be very aggressive in their pursuit of back taxes. If you fail to make a payment within 30 days of receiving a Notice of Assessment, the Department could take the following collection actions against you:

• File a tax lien against your wages, bank accounts, or property
• Garnish your bank account(s)
• Garnish your wages
• Seize IRS tax refunds.
• Seize Virginia state tax refunds through the VA offset program.
• Assess penalties and interest on the outstanding taxes owed, significantly increasing the amount due
• Revoke a professional or business license
• Take other legal action against you

Virginia State Statute of Collections for Taxes

The Department of Taxation’s ability to collect back taxes is limited somewhat by the Statute of Limitations. The Statute of Limitations is a period prescribed by law for a specific type of legal action.

According to Virginia Code § 58.1-104 and the Virginia Tax Administrative Code, the Department must assess past due taxes within 36 months from the date the taxpayer initially owed the tax. However, if the taxpayer fails to file his or her return, then the Statute of Limitations does not apply. In other words, the Department can collect taxes at any time in the future.

In terms of the time limit for the state to collect taxes assessed and due, Virginia generally has 20 years to obtain the state taxes after the date of assessment. The taxpayer should understand when the Statute of Limitations comes into effect. It is always essential to determine when the department assessed taxes and to timely raise the defense if applicable.

Some Options If You Owe VA Back Taxes

Few things are as upsetting to taxpayers as receiving an unexpected Notice of Assessment from the Virginia Department of Taxation. Even when taxpayers are aware that they likely owe back taxes, they are often shocked at the amount listed on the bill. It can be the result of errors or omissions on the part of the taxpayer that led to the Department recalculating the tax liability. Or it could merely be the tacking on of substantial penalties and interest. Whatever the reason, very few taxpayers can write out a check for the full amount listed on the Notice of Assessment.

Request an Informal Review

An inability to pay the amount due leads to many taxpayers ignoring the Notice, hoping that it will somehow go away. And yet, failing to take any action always results in the worst consequences for the taxpayer. As a preliminary matter, the taxpayer should determine whether the amount claimed on the Notice is accurate. If the taxpayer disagrees with the amount, he or she must first request an informal review. The taxpayer can ask for an informal review by calling the Department of Taxation. The tax representative will review the information with you over the phone to determine if a correction is warranted.

If the Department denies the initial informal review, then the taxpayer must request it in writing. The written correspondence must contain a detailed description of why you disagree with the bill and provide documentation to support your claims.

Request an Administrative Appeal

If your informal review is unsuccessful, you also have the right to file an administrative appeal. Taxpayers must file appeals within 90 days from the date that the Department assesses the taxes. If the tax appeal fails, you may also contact the Virginia Taxpayer Rights Advocate. The Taxpayer Rights Advocate attempts to help taxpayers resolve issues where the administrative process has been unsuccessful.

Fortunately, even if you are unable to obtain relief through the above channels, there are other options available to you short of paying the requested amount in full. The availability and usefulness of each remedy depend mainly on your personal and financial circumstances. If you are unsure which option is the best for you, reach out to a licensed tax professional by starting your search on our homepage.

Payment Plan

A VA tax payment plan allows you to repay the amount you owe in equal monthly installments. While each case is different, as a general matter, the Department of Taxation will allow payment plans of 12 to 24 months. Typically, the taxpayer will repay the full amount owed, plus interest and penalties that may continue to accrue during the term of the payment plan. Payment plans are, however, an excellent option to avoid paying a large lump sum payment and to potentially avoiding further collection actions.

Payment plans can be set-up online if you owe less than $25,000 in back taxes and meet several other requirements. Taxpayers that owe more than $25,000 can apply for a payment plan by calling the Department of Taxation.

Offer in Compromise (OIC)

Just like the IRS, the VA Department of Taxation also has an Offer in Compromise, An Offer in Compromise is a formal proposal to the Virginia Department of Taxation to pay off your VA back taxes for less than you owe. Consequently, both individuals and businesses can apply for an OIC if they otherwise satisfy the eligibility requirements. Specifically, there are three instances in which an individual or business may be eligible for an OIC:

• The taxpayer is not liable for the amount assessed (known as doubtful liability)
• The taxpayer is experiencing financial hardship and is unable to pay the amount owed (known as doubtful collectability)
• As a request for waiver of penalties over $2,000 where extenuating circumstances kept the taxpayer from filing on time

The taxpayer must complete the appropriate form depending on which type of OIC he or she is seeking. Moreover, when pursuing an OIC based on doubtful collectability, the taxpayer needs to complete a very detailed financial statement, as well as provide supporting documentation. When seeking a waiver of penalty or OIC based on doubtful liability, the taxpayer needs to provide a written explanation and documentation evidencing his or her extenuating circumstances.

Completed forms, supporting documentation, and payment, should the OIC propose an initial lump sum payment, must be mailed to the Department of Taxation. The Department will generally respond to the taxpayer within several months. The Tax Commissioner retains full discretion about whether to accept an OIC. Furthermore, the Department may also approve an Offer in Compromise with changes to the proposed terms.

Waiver of Penalty

Penalties tacked onto back taxes can be substantial and make getting out of taxes owed very difficult. The Department of Taxation will consider a “waiver of penalty” under specific circumstances. Usually, the taxpayer has extenuating details for non-compliance. For example, an illness kept them from filing a tax return on time. Taxpayers must request waivers in writing and must set forth specific details and supporting documentation. For penalties exceeding $2,000, the taxpayer must file an OIC.

If you owe VA back taxes and are unsure of your rights or options, reach out to a licensed tax professional with experience in Virginia state tax issues, or start your search below.

Disclaimer: The content on this website is for educational purposes only and does not serve as legal or tax advice. For specific help regarding your tax situation, contact a licensed tax professional or tax attorney.

Overview of Virginia’s State Tax Payment Plans

If a taxpayer can’t pay back taxes in the State of Virginia, and you can’t pay in full, consider a tax payment plan. A VA tax payment plan can help a taxpayer pay off their tax balance over time.  The Virginia Department of Taxation is the entity responsible for collecting and enforcing state tax laws. The Department of Taxation has many powerful ways to collect back taxes. If a taxpayer cannot pay their back taxes in full, the Department may:

• Garnish bank account(s)
• Garnish wages – which is difficult to remove once
• Place a tax lien on the taxpayer’s property
• Levy property
• Charge you interest and penalties

The state of Virginia uses the term tax lien in a different manner than the IRS. A tax lien is used to reference wage liens, bank liens, and memorandum of lien. A Virginia lien can be an actual seizure of assets through garnishments or bank seizures. 

A Virginia State tax payment plan can help taxpayers avoid and cease such collection actions. Obtaining a payment plan with the Department of Taxation is generally under the discretion of the collections officer. In some cases, the Department will transfer a delinquent tax account to a 3rd party. If so, the taxpayer or the taxpayer’s representative will have to contact the third party and work out payment arrangements. We discuss eligibility for tax payment plans in more detail below.

Typical Duration for a VA Tax Payment Plan

The duration of tax payment plans in Virginia can vary from case to case. However, there are some general rules concerning plan durations. The majority of tax payment plans require the taxpayer to pay the full amount within 12 months. However, the Department of Taxation will consider payment plans up to 24 months based on the taxpayer’s financial condition. The Department of Taxation retains full discretion when deciding how long payment plans should be.

In some cases, the Department of Taxation may assign a taxpayer to a third-party collection agency. If so, it may be possible to negotiate a longer-duration repayment plan.

In some instances, a taxpayer can set up a step payment plan. A step payment plan allows the taxpayer to make smaller monthly payments to start and then increase to more significant amounts later (usually after 12 months). Therefore, a taxpayer can begin with a lower monthly payment over 24 months but can renegotiate after the first 12 months to keep monthly payments lower.

Possible Negative Consequences of a VA Payment Plan

Unlike a tax settlement (or Offer-In-Compromise), a taxpayer must repay the full amount of their back taxes. The significant advantage of a payment plan is that a taxpayer can make manageable monthly payments versus paying a lump sum amount if they were to pay their taxes in full or enter into an Offer-in-Compromise.

Another negative of payment plans is that penalties and interest will continue to accrue. Penalties and interest can be substantial and can significantly increase the amount the taxpayer must repay over the length of the payment plan. Therefore, a taxpayer can pay off their balance as soon as possible to avoid penalties and interest. When you're on a payment plan, the state can also take your state tax refund through the VA refund offset program. If the state takes your refund, you still have to make your regular monthly payment. 

Despite these negatives, payment plans may be the best (and only) option for many taxpayers that lack the financial means to pay back taxes. Moreover, payment plans may help you to avoid or cease further collection action.

What If You Disagree With a VA Notice of Assessment?

If the taxpayer disagrees with the bill, they have the right to request an informal review. The taxpayer can request this by calling the Department of Taxation. If the taxpayer cannot clear their tax bill, they can request a review in writing. Written inquiries require a detailed description of why the taxpayer disagrees with the tax bill, as well as supporting documentation.

If the informal review is unsuccessful, the taxpayer also has the right to file an administrative appeal. Taxpayers must file an appeal within 90 days from the date that the Department assessed the taxes.

If the taxpayer loses the appeal, or if the taxpayer receives a Notice of Assessment and does not dispute the tax liability, they can attempt to set up a payment plan with the Department of Taxation.

How Can I Apply for a Payment Plan with the State of Virginia?

To set up a payment plan, the taxpayer generally must obtain a bill from the Department of Taxation. In Virginia, initial tax bills are called a “Notice of Assessment.” The Department of Taxation will send the taxpayer a Notice of Assessment if they owe taxes when filing their tax return but did not submit payment in full. Once the taxpayer receives a Notice of Assessment, they have 30 days to pay their back taxes in full or provide an appropriate administrative response. If they fail to respond within 30 days, they will begin to accrue penalties and interest.

Taxpayers can set up a payment plan online if you owe less than $25,000 in combined taxes, penalties, and interest and do not have any of the following:

• Padlock
• Revocation
• Criminal warrant
• Bond
• Tax lien issued to an employer or bank
• Bankruptcy filing
• Assignment to a 3rd party collection agency or Virginia Tax field agent

If the taxpayer does not meet the above requirements, they can still apply for a payment plan by contacting the Department of Taxation over the phone at 804-367-8045. Even if they meet the requirements for setting up a payment plan online, they may still want to call the Department to inquire about a longer-term payment plan.

The Department of Taxation does not charge taxpayers a fee to apply for a payment plan.

What Factors Could Lead to a Default of a Payment Plan?

If the Department of Taxation approves a payment plan for a taxpayer, the taxpayer must make all your monthly payments on time. Failure to make payments on time can result in default. If the taxpayer defaults under their payment plan, the Department of Taxation will likely resume collection action. Also, a history of defaults under payment plans could impact the taxpayer’s ability to obtain a payment plan in the future. In addition to failing to make payments on time, failing to file future returns, and pay any other taxes when due could result in default.

Since defaulting can result in the termination of their payment plan, it is advisable to schedule automatic payments using their online account. The Department of Taxation accepts direct debits from their bank account, credit or debit cards, and checks.

Payment plans can be a useful tool to help taxpayers get caught up on your Virginia back taxes. While the Department is amenable to short-term payment plans, those taxpayers seeking longer-term plans will likely need to document financial hardship. An experienced tax professional can assist you in setting up an affordable payment plan. A licensed tax professional can also advise you of your rights. 

If you owe VA back taxes and are unsure of your rights or options, reach out to a licensed tax professional today that has experience resolving VA state tax issues. 

Disclaimer: The content on this website is for educational purposes only and does not serve as legal or tax advice. For specific help regarding your tax situation, contact a licensed tax professional or tax attorney.

A Broad Overview of Virginia’s Offer In Compromise Program

Many taxpayers that owe back taxes in the State of Virginia are unaware that there are alternatives to endless tax collection efforts. Not only are taxpayers frightened when they receive a collection notice from the Virginia Department of Taxation, but there is also a general lack of knowledge about their options. One such option is known as an Offer in Compromise (OIC). An OIC, or more commonly known as a “tax settlement,” is a formal proposal to the Department of Taxation to settle your outstanding back taxes for less than you owe.

Below we explore the advantages of an OIC. Furthermore, we review the procedures for requesting an OIC and eligibility requirements. An OIC can be confusing and cumbersome. Therefore, a taxpayer may want to consult with an experienced Virginia tax professional to determine if they should pursue an offer in compromise.

How Does an Offer in Compromise Work and What are the Benefits?

An Offer in Compromise is a formal proposal to the Virginia Department of Taxation, essentially setting forth a partial payment plan for settling back taxes. The total of all payments the taxpayer makes under an OIC will be less than what they owe in back taxes, penalties, and interest.

Unlike a payment plan, an OIC is a formal procedure that requires the taxpayer to complete the appropriate form. We cover the necessary tax forms in the following section. Depending on which tax form the state requires, the taxpayer may have to complete a detailed financial statement. The taxpayer may also pay a $50 administrative fee and include supporting documentation, such as:

• A Letter of circumstance detailing your situation
• Recent pay stubs
• Copies of statements for assets like retirement accounts
• Documents evidencing all other income, such as rental income or social security benefits
• Copies of recent account statements from lenders evidencing your liabilities
• Documentation supporting any exceptional circumstances
• For business taxpayers – a profit and loss statement for the preceding 12 months and information on any receivables

Setting Form Payment Terms

The taxpayer must also set forth the payment terms of the OIC by completing the designated space on the form. Payment options can range from just a one-time upfront payment to periodic payments. When opting for periodic payments, often, taxpayers will propose a payment upfront and enclose that payment when returning the OIC form, although a down payment is not required. If the Department of Taxation accepts the OIC, the taxpayer must timely make all payments as provided in the OIC. If the taxpayer fails to make all payments, the OIC will become void, and he or she will be liable for the full amount of the taxes owed.

An Approval or Denial

The Department does not have to accept an OIC. The Tax Commissioner has the authority to accept or deny an OIC. It is possible to propose what the taxpayer believes are reasonable payment terms, even including a sizeable initial payment, only for the Department to deny the offer. Even worse, their enclosed payment gets applied towards the outstanding balance. Even if the Department rejects the OIC, the taxpayer can sometimes resubmit the offer. While every case is different, it can take several months to hear back from the Department regarding an OIC.

An OIC is perhaps the most effective method for resolving back taxes. Not only can the taxpayer get out of tax liabilities by paying less than the outstanding balance, as well as reducing or eliminating penalties, but there is also some flexibility in the terms proposed.

An OIC is not an ideal fit for every taxpayer. In addition to meeting eligibility requirements, the taxpayer will require sufficient financial resources to make lump sum or large payments to the Department. Taxpayers that are not eligible or who receive an OIC denial can still explore other remedies such as a payment plan or by requesting a waiver of penalty discussed here.

Who is Eligible for an Offer in Compromise in Virginia?

There are three instances in which an individual or business may be eligible for an Offer in Compromise in Virginia:

• The taxpayer is not liable for the amount assessed (known as doubtful liability)
• The taxpayer is experiencing financial hardship and is unable to pay the amount owed (known as doubtful collectability)
• As a request for waiver of penalties over $2,000 where extenuating circumstances kept the taxpayer from filing on time

Relevant VA Offer In Compromise Documents

Depending on which category the taxpayer falls into, he or she needs to complete the appropriate form. Where the OIC is based on doubtful liability or the taxpayer is requesting a waiver of penalty over $2,000, he or she must complete and submit the following form:

• Individuals: Form OIC I-2
• Businesses: Form OIC B-2

With OICs based on doubtful collectability, the taxpayer needs to use the following forms:

• For Individuals: Form OIC I-#, FIN I-1, OIC-Fee
• For Businesses: Form OIC B-3, FINB-1, OIC-Fee

The documentation required for OICs based on doubtful liability does not need an extensive financial statement like doubtful collectability. Generally, the taxpayer needs to submit documents supporting their claims of illness, extenuating circumstances, and a letter detailing your conditions justifying an OIC. Regardless of the type of OIC requested, all forms must be completed and mailed along with supporting documentation and payment (if you are making an initial payment) to:

Once a Taxpayer Submits an OIC to the Department

Once the Department of Taxation receives your OIC, they will notify you by mail of their decision. In addition to accepting or denying the OIC, they may also accept the OIC with changes. For example, they may require a modification of the payment terms. To avoid defaulting under the OIC, you will need to timely make all payments, as well as timely filing of all future returns and making all required tax payments. Please note that even if you submit an OIC, the Department may still file a tax lien against your property. If you timely make all payments under the OIC, however, the lien will be removed.

An Offer in Compromise is an excellent way for Virginia taxpayers to resolve back taxes. The requirements and procedures for requesting an OIC can be complex. If you have questions about submitting an Offer in Compromise contact an experienced Virginia tax professional today.

If you owe VA back taxes and are unsure of your rights or options, reach out to a licensed tax professional today that has experience resolving VA state tax issues. Start your search below to find the top-rated professional to help with your unique tax situation.

Disclaimer: The content on this website is for educational purposes only and does not serve as legal or tax advice. For specific help regarding your tax situation, contact a licensed tax professional or tax attorney.

IRS Collection Appeals Program (CAP) & Form 9423

Collection actions by the Internal Revenue Service (IRS) can have disastrous consequences for both individuals and businesses. Many taxpayers believe that they lack any recourse to either prevent IRS action or challenge a collection that has already occurred. However, there are some important and powerful remedies available to taxpayers in such cases. One option is known as the Collection Appeals Program (CAP). Below, we discuss the Collection Appeals Program, when a taxpayer can use it, and the closely related appeals program known as Collection Due Process (CDP).

How Does the Collection Appeals Program Work?

The Collection Appeals Program (CAP) is one of two appeals programs available to taxpayers to challenge IRS collection actions. The Program allows the taxpayer to appeal a collection action before or after certain IRS actions. The taxpayer can also use CAP in connection with issues arising under installment agreements. It is essential to note taxpayers cannot challenge the underlying tax liability in a CAP. Moreover, the taxpayer cannot appeal an adverse decision made in the CAP.

Actions the Collections Appeals Program is available for

The Collection Appeals Program can be used to appeal the following types of collection actions:

• A Notice of Federal Tax Lien (NFTL) that was either filed or will be filed by the IRS.
• A wage garnishment (or levy on your wages) that the IRS has already attached to your wages, meaning that your employer is deducting money from your check each pay period, or a levy that will be issued
• A bank account garnishment (levy against your bank account) that has already been executed or will be in the future
• A seizure of property that has already occurred or is in the process of happening. The appeal must be brought before the property is sold
• Requests to issue lien certificates (i.e., withdrawal, discharge, or non-attachment) have been denied
• For installment agreements where there has been a proposed or actual rejection, termination, or modification of the installment agreement

Notice of Federal Tax Lien

A Notice of Federal Tax Lien alerts creditors that the government has a legal right to your property. The government’s lien attaches to property you own and even to property you may acquire after the Notice was filed. A tax lien can have a significant impact on your credit and the ability to sell assets. Even though tax liens do not show on credit reports anymore, creditors still use alternative methods.

Any Type of Tax Levy

A tax levy is the subject of the second, third, and fourth bullet points above. As a general matter, the IRS cannot seize your property unless it first provides you with advance notice. A Notice of Intent to Levy, it is a written notice that the IRS intends to seize your property. The IRS must send the notice must at least thirty (30) days before seizing your assets and must explain the reason for the seizure, as well as explain your appeal rights.

Installment Agreements

Installment agreements are where the IRS agrees to accept payments of back taxes over a period of time paid in monthly installments. There are several different types of installment agreements, including guaranteed, partial payment, streamlined, and non-streamlined.  The IRS will notify you in writing if your proposed installment agreement is not accepted or if your existing installment agreement has been modified or terminated due to a default. Once you receive the notice from the IRS you can challenge the decision through the CAP.

What is the process for filing an appeal under the Collection Appeals Program?

The process depends largely on the current status of the taxes owed and the nature of the appeal. When the IRS assigns your case to an IRS Revenue Officer, you must first notify the Officer that you want to appeal the decision. If the Revenue Officer does not agree with the reasons for your appeal, you will then have a chance to talk to the Revenue Officer’s Manager. In a situation where the Manager also disagrees with you, then you have 48 hours to file a Collection Appeal Request (IRS Form 9423).

If, however, your case has been assigned to the Collections division, you must first contact them using the number listed on the official notice that you received from the IRS. You must explain the reasons for your appeal, and if denied, then you must notify the Collections Manager of your intent to file Form 9423. You must postmark the completed form within three business days of the conference with the Collections Manager.

For an installment agreement, however, it is not necessary to lodge an informal appeal prior to filing Form 9423. You must file the form within 30 days from the date listed on the notice advising you of a rejected proposed installment agreement. If the IRS terminates an installment agreement, the timeline to file a CAP is 76 days.

How to file IRS Form 9423

Form 9423 requires somewhat limited information, mostly basic personal and contact information. There is a section that requires you to list the reasons that you disagree with the collection action. As a general matter, it is easier to provide a detailed explanation on a separate sheet of paper and attach it to your Form. The Form must period to the IRS within the timeframes listed in the above section.

What should I expect after I file Form 9423?

One immediate benefit of filing a CAP appeal is that the IRS will generally stop the collection action until the Appeal has been resolved. There are some exceptions to this, like if the IRS believes that you will attempt to dispose of assets, but in the vast majority of cases, you will get some temporary breathing room.

The IRS reviews CAP appeals quickly. The IRS will schedule a telephone conference with you within several days of reviewing your appeal. At the Appeals conference, you are free to represent yourself or an attorney, certified public accountant (CPA), or any person authorized to practice before the IRS may represent you. If you wish to have a representative attend, you must file a completed Power of Attorney Form 2848 prior to the conference.

Difference CDP and CAP Appeal Programs

The primary difference between a CDP and CAP appeal is one of timing. Unlike a CAP, the taxpayer cannot appeal a proposed collection action with a CDP. For instance, a taxpayer could not file a CDP before a Notice of Federal Tax Lien has been filed. Moreover, unlike a CAP, filing a CDP will not put a stop to IRS collection actions. The main reason for this is that a CDP takes substantially longer to resolve than a CAP. The IRS does not want to put off collection for that length of time. Finally, you cannot appeal installment agreements via a CDP.

The Collection Appeals Program can be an effective method for appealing and even ceasing IRS collection actions. To be sure, the requirements and procedures for filing an Appeal through the CAP can be complex. If you are facing IRS collection action, reach out to a licensed tax professional today to discuss your options. Start your search below.