Who ya gonna call?

[erchess]

I just had my first client of this year who is not sure how or when he will be able to pay the IRS. The individual did not want my help with an installment agreement at this time. We all know that the IRS is advertising that people in distress should call in earlier rather than later but is there any particular number that people in NC should call? We all know that there are always long waits at (800) 829-1040 so is there a more favorable number?

[JoshinNC]

Tell them to wait for the assessment notice

If they don't want my help than they don't get any help. I'd just tell them that the IRS will send a notice and they can call the number on the notice.

If the balance is less than $10k they don't need to send anything in, just a phone call.

[FEDUKE404]

Unpaid taxes CAN be a bummer!

I've seen those ads with the Cheshire-cat smiling faces of the owners offering to resolve any problems with money owed to the IRS.

Sadly, many people think just because they owe taxes someone can wave a magic wand and the problem will go away. Certainly there is room for negotiated tax liabilities and payment scheduling, but a client owing money probably stands a better chance at working out something through the installment agreement with the IRS.

You might remind your client it is better to attempt to make some payments rather than just pay nothing toward a large tax bill.

And I would suggest you collect your own fees up front!

FE

[erchess]

Perhaps I was unclear

I did the return and I got paid for it by the employer of the individual. I do an 1120S, individual returns for three of the four owners, and returns for those employees and contractors who so desire.

In the case in question the "employee" is actually a former contractor and in my opinion legitimately so. He had to be laid off as a cost saving move but he was still entitled to get his return done by me at no charge to him. He made no estimated tax payments and to make things worse had debt forgiven and none of the exceptions applied. He may be able to pay his tax debt by 4/15 and he will certainly have it paid off by the end of calendar year 09 including any interest. He simply wants to work his new job a little longer and continue budget cutting a few more weeks before talking to anyone at the IRS and he doesn't particularly feel the need for me to be involved. I still thought it would be nice if I could give him a better number to call than the one everyone knows or even than the one that will be on the eventual notice.

[JohnH]

If this client just needs to get to the end of the year before paying, then he should use an extension to accompish what he wants to do.

He should file an extension (with or without partial payment) by April 15, and then file the return on Oct 15 with a partial payment. By the time the IRS bills him, it will be late November or early December. At that time he can either call them and arrange to pay in 90 days, in which case there will be no installment agreement fee. If he can't pay by the end of the 90 days, he can then call them back and set up an installment agreement. Using the above strategy will get him well into early 2010 before he has to deal with the taxes, plus the usual FTP penalties & interest which he will pay no matter how he handles the situation. The net effect will cost him an amount that equals roughly 1-1/4 % per month.

[erchess]

WOW John

I wish I had known that on Thursday when I prepared and filed his return. What is your best advice given that the return has been accepted? Putting together what I have read it sounds like he should make any partial payments he can, being careful to fill out the checks properly with his SSN and "2008 F1040" in the memo field and being careful to keep records. It sounds like he should not call in but should wait for the letter I have been trying to avoid and then call in to the number on the letter, negotiate 90 days and then either pay within that time or call back and negotiate an installment agreement.

[JohnH]

He should call them and request a payment arrangement. He can request a payment which will pay off the balance over 5 years in order to keep the payment as low as posisble to be sure he doesn't default. Then when he's ready to it off at the end of the year, he just sends them the balance.

People sometimes panic when they set up a payment arrangement and agree to a payment that may cause them financial difficulty because they are afraid they will offend the IRS. Theny they get hit with a more pressing crisis and default on the payment agreement - bad move. Better to ask for the lowest permissible payment to help insure they don't defualt. Then if they find that they can pay more or pay it off early, they can do so at their convenience.

Even though you couldn't help this guy, this is good info to have because I think we are all going to see more of these type of situations this year, and even more of them next year. These clients who can't pay also deserve the best help we can give them.

[WhiteOleander]

When we have someone in your client's position, we do not have them call the IRS. If they think they can pay the debt in two-three payments, we have them file the return. Then when they get the letter, we have them send in as much as they can at that time. Then we tell them they will get another letter showing the payment. Send in another payment at that time. Keep doing this til the debt is paid off.

This will work pretty well if they can pay it off relatively quickly. This way they save the costs of setting up the installment plan, etc.

[JohnH]

I agree with that approach when it's called for, but in this case erchess already said the client needs until the end of the year. Partial payments in response to notices won't get him there - the system will box him in before year-end. Its likely he will get discouraged, fail to respond to a notice in a timely manner at some point, and then get likely get hit with a levy. In some cases it's worth the installment agreement fee to have some structure & flexibility.

[ChEAr$]

on line installment agreement

Don't forget this worthwhile tool which client can use.
Of course this usually means client needs our help in navigating and understanding the
IRS website. So erchess, if client hasn't done anything by April 10 for example, he can come to your office and you can walk him through the process on your computer.

[JohnH]

Great suggestion, Harlan.

I have always just given them the printed Installment Agreement Request or suggested thay they call IRS themselves, since it's fairly routine if they meet the qualifications. I looked at the online process after seeing your post, and it does look very straightforward.

[erchess]

His Actual Situation

He does not know where he stands because at present he is working only very part time but he is pursuing the possibilities of other jobs and of getting more hours where he is. He thinks he may pay the whole thing off by 4/15 or he may drag things out until the end of the year.

[JohnH]

Prediction:

1) He won't pay it off by Apr 15. He will probably be calling you on Apr 14 or or the afternoon of the 15th asking, "What's the least I can pay and still stay out of trouble?"

2) He will still be dealing with this thing this time next year. Unless you get him to do the smart thing now, you'll likely be dealing with it too.

I'd urge him to get on an installment agreement now, both for his own good and to minimize the aggravation to you.

You could at least send him a 9465 with the pertinent data filled in. Keep a copy handy in your files so you can give it to him when he loses the first one. You'll find out about this when he calls you in a panic, wanting an urgent meeting with you to decide what to do, after he receives the certified letter threatening a levy around June or July. This will all happen the day you are getting ready to go on vacation, so you may as well get ready now. Procrastination is much less stressful when you're proactive about it.

[thomtax]

If this client just needs to get to the end of the year before paying, then he should use an extension to accompish what he wants to do.

He should file an extension (with or without partial payment) by April 15, and then file the return on Oct 15 with a partial payment. By the time the IRS bills him, it will be late November or early December. At that time he can either call them and arrange to pay in 90 days, in which case there will be no installment agreement fee. If he can't pay by the end of the 90 days, he can then call them back and set up an installment agreement. Using the above strategy will get him well into early 2010 before he has to deal with the taxes, plus the usual FTP penalties & interest which he will pay no matter how he handles the situation. The net effect will cost him an amount that equals roughly 1-1/4 % per month.

John - I appreciate this info on how to approach a situation. I have not had this situation yet, but may have this week. Plus, it gives me another approach to keep in mind for the future.

LT

[Lion]

On-Line

The set-up fee for an installment agreement is less if done on-line. Also, the interest rate while a taxpayer is on installment is less than if they are not, so you have to figure the break-even point of him just trying to pay it before they catch up to him.