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From what I've seen, the IRS is not particularly flexible or friendly when it comes to collecting delinquent taxes (as evidenced by the lien on your house -- they may also garnishee your wages -- to collect the 'larger' payment you say that you cannot afford). Since when are paying taxes optional or based on a 'free will' assessment of what one thinks they can afford?
You say "you could not pay your taxes for one-year" (Nobody pays taxes because they simply have extra money lying around!) -- Since taxes are deducted before you get your Net Income OR must be paid Quarterly if you are self-employed, it's not clear what you mean. Is this a euphemism for intentional income tax evasion?
No, it's not intentional income tax evasion--I file every year and always pay (although usually owe zero). The one year I could not pay was because I had to liquidate assets resulting in a sizeable income.
I just phoned them and they were not helpful. They told me I need to contact the IRS directly and if issues cannot be resolved, then contact the Taypayer Advocate. I am hesitate to call the IRS because if they demand setting up an installment payment plan I cannot afford (being retired, disabled, and on Social security) I may not be able to pay for heating bills and health insurance not to mention food, gas, etc.
I just phoned them and they were not helpful. They told me I need to contact the IRS directly and if issues cannot be resolved, then contact the Taypayer Advocate. I am hesitate to call the IRS because if they demand setting up an installment payment plan I cannot afford (being retired, disabled, and on Social security) I may not be able to pay for heating bills and health insurance not to mention food, gas, etc.
The Taxpayer Advocate is set up to help people who have not been able to resolve their tax issue through normal channels. Requesting or discussing a payment plan is a routine thing they are not going to get involved with.
They cannot "demand" you set up an installment payment plan. That is a voluntary thing. You must apply for it, they will take a financial statement from you to determine the payment(there used to be a way to name your payment for amounts under I think $10,000 so long as it paid the amount due off in 3 years). Over that threshold whatever it is now, they take a financial statement to determine the payment amount. After all that you have to sign it. They cant make you do any of that.
The IRS has protected themselves by putting lien on your house. In theory, they can seize your house and sell it to pay the taxes due. In practice, they rarely do that anymore unless youre a drug kingpin, criminal or huge tax fraud involved.
You are racking up penalty and interest every day you do nothing.
First, the previous poster is correct. The IRS probably knows already that you have limited income and filed the lien (after sending out numerous notices) to protect the government's interest in any equity in the property. Your property now does not have clear title. While it should not hold up sale if all works properly, it indicates problems with the title that many purchasers do not want to get involved in.
Nothing at all is lost if you call or go in to talk about an installment agreement. They will first ask for full payment, then an installment agreement for less than 3 years, and then a financial statement to see if you can pay anything at all. It helps if you already have studied your income sources and expenses and know where you stand financially. I am assuming that you have limited income since you stated you are disabled and on SS.
If you have assets, cash, savings accounts, etc. or income in excess of expenses, they would be correct in asking for payment of some amount and/or an installment agreement. Only you know where you stand.
Increasing your withholding is not correct. That merely has the money sit around until you file your next year's return and determine if you are getting a refund which will be automatically transferred to your debt. Better to keep control of your own money and send it in as a "voluntary" payment.
I worked for the Taxpayer Advocate office for 15 years. Ignoring a problem does not make it go away. They are for problems that are not resolved thru normal channels. They are not to "get around" working with normal channels.
No, it's not intentional income tax evasion--I file every year and always pay (although usually owe zero). The one year I could not pay was because I had to liquidate assets resulting in a sizeable income.
Sorry for your difficulties - Hope you can work this out.
As an update, there is something called Fresh Start that went into effect not long ago. If the amount due is under 50,000 you can get automatic approval for a plan that pays it off in up to 7 years. At least that's my take on it from a quick look. Google IRS Fresh Start and you will see the rules.
One thing to know is that if you filed the return on time even without paying, and you enter into a payment agreement, they will reduce some of the interest.
I am surprised that they aren't garnishing your social security and disability yet. It is best to start working with them sooner rather than later.
They could force a fire sale of your home based on the lien, fyi....... They don't care what they get as long as the lien as satisfied so you could lose your home for as little as 40,000.
Call them. Its always better to contact them than just ignore things.
They will tell you what a payment plan would involve.
^This.
And the bolded has to be exactly what the OP did. The IRS does not just put a lien on a house or garnish wages without a number of letters first being sent asking the taxpayer to pay up. If you just call them or write to them, they set up a payment plan.
If you are not willing to talk to them about an installment payment, I would start making the largest monthly payment you can...make sure you write on the check your SSN and the tax year it is for so they don't apply it to the current year.
I did read in some of the explanations on Fresh Start that were written by accountants, that if you make regular payments for a while, it is sometimes easier to get them to accept that payment as the installment agreement payment.
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