Payment Alternatives When You Owe the IRS

Payment Alternatives When You Owe the IRS

Phyllis Grimes March 25, 2015

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• Welcome media • SBSE dot webinars at irs.gov

– Questions – Feedback – Contact information

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• IRS dot gov/Forms Pubs • IRS dot gov/IRM • IRS dot gov/Tax Pros • IRS dot gov

– Search “collection”

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• Submit questions – Not case specific

• Q&A at the end • Subject Matter Experts will answer

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Presentation is … • Educational/Informational • Not official guidance

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Agenda

• Online Payment Agreements update • Case resolution prerequisites • Collection Information Statements • Selling or refinancing property when there’s a

tax lien

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Online Payment Agreement Update

Businesses are eligible if they … • Owe $25,000 or less • Can pay in 24 months or less • Are current with filing/paying requirements

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Businesses – • $25,000 or less

– Includes assessed penalty & interest

• Can pay down to qualify – Pay down – Then apply

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Businesses • If $10,001 – $25,000 owed • Direct debit payments required

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Finding Online Payment Agreement • IRS dot gov “Tools” or Keyword OPA Login Process • At “Date Business Established” • Enter month/year EIN assigned

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Installment Agreement Terms

• Short-term full pay agreement – No user fee

• Monthly payments – $52 fee if direct debit – $120 if payments by mail

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Online Payment Agreement

Advantages • Fast • No direct contact • Immediate approval

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OPA Update Summary

• Businesses can use if – – Owe $25,000 or less – Full pay 24 months or less

• All payment terms/options available • Advantages over calling/writing

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Case Resolution Prerequisites

• Compliance today • Compliance tomorrow • Compliance in the future

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Cost of Non-Compliance

• Late filing penalty – Up to 25%

• Late payment penalty – Up to 25%

• Interest – Until full balance paid

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• No current/future compliance • No easy resolution

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Collection’s mission – • Compliance today • Compliance tomorrow • Compliance in the future

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Help at IRS dot gov

Keywords • Withholding • Estimated taxes • Small business • Payroll taxes • Filing or paying late

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Collection Information Statements

• Quick & easy solution … • No financial information required

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• No quick & easy solution … • Financial information required

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Roadmap to resolution … • Currently not collectable? • Installment agreement? • Asset liquidation? • Offer in compromise? • Combination of above?

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No simple solution? • Gather financial information • Prepare Collection Information Statement • Provide to IRS

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Collection Information Statements (CIS)

Forms • 433-F – Collection Information Statement • 433-A – CIS for wage earners and self-

employed • 433-B – CIS for businesses

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CIS for Offer in Compromise

• Form 433-A (OIC) • Form 433-B (OIC) • Only for offers

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CIS Form 433-F

• Short & simple • Used by –

– Accounts Management & Automated Collection (ACS)

• Used for – – Individual & self-employed taxpayers

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CIS Form 433-F

Sample uses – • Request for installment agreement

– Other payment options? – Installment agreement approved? – File notice of tax lien?

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CIS Form 433-F

Sample uses – • Request for temporary hold • Other payment options? • Temp hold appropriate? • File notice of lien?

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CIS Form 433-F

Can’t pay today? • Have 433-F ready – including supporting

documents • Consider all payment options • Provide 433-F to accounts management or

ACS

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CIS Form 433-F

If • Early in collection process • Individual taxpayer • No streamlined installment agreement • Can’t pay Then • 433-F required

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CIS Forms 433-A and 433-B

• Comprehensive • Form 433-A for wage earners, self-employed • Form 433-B for businesses • Instructions

– Publication 1854 – How to Prepare Form 433-A – Publication 5059 – How to Prepare Form 433-B

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CIS Form 433-A

• Used by – Revenue Officers

• Used when – Liable party is wage earner or self-employed – Can’t pay in full – Don’t qualify for streamlined payment plan

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CIS Form 433-A

7 sections • Personal • Employment • Other financial • Asset • Income statement • Business • Sole-proprietor

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CIS Forms 433-A & B

Keys • No blank lines • Attachments as needed • Current information • Verification

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Allowable Living Expenses

• IRS dot gov – search terms – Allowable living expenses – Collection financial standards

• Guidelines providing – Consistency – Fairness

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CIS Form 433-B

• Used by – Revenue Officers

• Used when – Liable party is a business – Can’t pay in full – Don’t qualify for streamlined payment plan

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CIS Form 433-B

• Verification – – Balance sheet – Income statement – Cash flow analysis – Bank statements – Cancelled checks – Receivables – Other

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CIS Form 433-B

Other required items • Credit cards accepted • Payment processors used • Info on key personnel Instructions • IRS Publication 5059

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Roadmap to Resolution

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Required when – • Can’t pay • Don’t qualify for streamlined installment

agreement

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Keys – • Complete, nothing blank • Add attachments • Current and verified • Submit early • Work with Collection

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References - Resources

• IRM Part 5, Chapter 15, Financial Analysis Handbook

• IRS dot gov - search – Allowable living expenses and/or – Collection financial standards

• Publications 1854 & 5059 – How to prepare Forms 433-A and B

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Federal Tax Liens

Selling or Financing When There is a Tax Lien

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General Lien References

• IRC §6321 Lien for taxes • IRC §6322 Period of lien • IRC §6323 Validity and priority • Reg. §301.6321, 22 & 23 • IRS dot gov – search “lien”

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Liens and Selling or Financing

• Notice(s) of lien filed? – Public records – Account transcript – IRS at 800-913-6050

• Get copy of lien(s) • Contact IRS

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Liens and Selling or Financing

• Will sale or finance pay in full? • Notice of lien amount not equal to payoff

amount

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Lien Payoff Amount

• Publication 4235 – Local phone numbers & addresses

• Centralized lien operation – 800-913-6050 – Address, phone & fax in Pub 4235

• Payoff letter

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Lien Payoff Letter

• Payoff amount • Good through date • Lien release information

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Payoff Amount Disclosure

• Form 8821 – Information Authorization • Who are you? • Who gets your information? • What information?

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Full Payment Summary

Sale or financing will pay in full • Get copies of lien(s) • Contact Lien Operation 30 – 45 days in

advance • Request lien payoff letter • Provide Form 8821 – Information

Authorization

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Sale or Finance Will Not Full Pay

What’s your plan for the remaining balance? • Payment agreement • Offer in Compromise • Other

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Lien Discharge or Subordination

• IRC section 6325(b) Discharge • IRC section 6325(d) Subordination

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Discharge Example

Lien payoff – $75,000 • Sale price $200,000 • Less first mortgage $125,000 • Less closing costs $15,000 • Equals IRS lien interest $60,000

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Subordination Example

FMV of property $200,000 IRS Lien $75,000 • New loan $160,000 • Less old loan $125,000 • Less closing costs $5,000 • Equals IRS lien interest $30,000

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Resources

• IRS dot gov keyword “lien” • IRS lien videos • Publication 783 – How to Apply for Discharge • Publication 784 – How to Apply for

Subordination

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Resources

• Publication 4235 – Collection Advisory Group Numbers and Addresses

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Discharge or Subordination

Application Denied • Appeal rights • Form 9423 – Collection Appeal Request • Publication 1660 – Collection Appeal Rights

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Discharge or Subordination

Application Approved • Conditional commitment letter

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• Send feedback • SBSE dot webinars at IRS dot gov

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CIS Resources

• Internal Revenue Manual (IRM) – Part 5, Chapter 15, Financial Analysis

• IRS dot gov – search – – Allowable living expenses – Collection financial standards

• Publications 1854 & 5059

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Lien Resources

• IRS dot gov search “liens” • IRS Videos dot gov – IRS Liens • Publication 783 – How to Apply for Discharge • Publication 784 – How to Apply for

Subordination • Publication 4235 – Collection Advisory Group

Numbers & Addresses

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Payment Alternatives When You Owe the IRS

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