If you owe more than $50,000 to the IRS, the agency may place a lien on your assets, revoke your passport, or pursue other collection actions. However, there are ways to work with the IRS and protect your assets. In particular, COVID-related legislation makes it easier to set up a payment plan if you owe more than $50,000 in back taxes. The consequences and resolutions available to the taxpayer vary by the amount of their tax liability. For the most part we’re going to discuss the consequences and resolutions for those that owe $50,000 or more.
The important thing is to be proactive. If you contact the IRS and ask for an arrangement, you will get a more favorable outcome than if you wait for the agency to contact you. To get help dealing with $50,000 or more in unpaid taxes, contact us today. The tax attorneys at the W Tax Group can help you negotiate with the IRS.
What Happens If You Owe More Than $50,000 to the IRS?
The IRS considers unpaid taxes over $50,000 to be serious. When you owe this level of back taxes, the agency can and will make advanced collection efforts (asset seizure, bank levy, wage garnishment, etc) to reclaim their money. The IRS may also tell the State Department to revoke your passport or refuse to issue you a new one. But you can avoid these collection actions by making arrangements.
Options If You Owe More Than $50,000 to the IRS
If you owe more than $50,000 to the IRS, you have the same resolution options as someone who owes a smaller tax liability, but generally, the IRS will look more closely at your financial situation before making an agreement with you. Here are the main options:
- Installment agreement — you make monthly payments on your tax bill until it’s paid off in full.
- Partial payment installment agreement — you make monthly payments on your tax bill until the collection statute expiration date (CSED), and the IRS agrees to write off any remaining liability after that date.
- Offer in compromise — you make a lump sum payment on your tax liability, and the IRS agrees to write off the remaining amount.
- Hardship status — the IRS stops collection actions on your account because you cannot afford to pay, but the agency reviews your financial situation every year or two.
How to Set Up a Payment Plan When You Owe More than $50,000 in Back Taxes
If you owe less than $50,000, you can set up a payment plan online. Typically, as long as your monthly payment is enough to pay off the tax bill within 72 months or less, the IRS will automatically approve your agreement. Taxpayers who owe more than $50,000, however, need to apply through the mail or over the phone.
Generally, when you owe more than $50,000, the IRS requires you to submit Form 433-F (Collection Information Statement) when you apply for a payment plan. This form requires detailed information about your finances, and it helps the IRS ensure that you are making the largest payment possible on your tax bill. The Taxpayer Relief Initiative allows some taxpayers to avoid this requirement.
Taxpayer Relief Initiative If You Owe More Than $50,000
Legislation passed during the COVID pandemic allows certain qualified individual taxpayers to set up a payment plan without a Collection Information Statement. To qualify, you must owe less than $250,000 in taxes and you must offer a reasonable monthly payment. The IRS may request a Collection Information Statement at its discretion.
This plan is called a non-streamlined installment agreement. The Taxpayer Relief Initiative also makes it easier to set up a short-term payment plan even if you owe more than $50,000. Keep reading for details on both these options. Short-Term Payment Plan for Tax Bills Over $50,000
If you owe over $50,000 but less than $100,000, you may qualify for a short-term payment plan. You don’t have to make monthly payments. You just need to be able to pay off your tax bill in 120 days or less. You can apply for this arrangement online.
The Non-Streamlined Installment Agreement
In 2020, the IRS started offering a non-streamlined installment agreement (NSIA) to taxpayers who owe more than $50,000. Here are the requirements:
- Must be an individual, not a business.
- Must owe less than $250,000, not including penalties and interest.
- Your case cannot be assigned to a revenue officer yet.
- You can pay off the entire balance before the collection statute expiration date.
If you meet these criteria, the IRS will typically allow you to set up a payment plan without making a financial disclosure, but the agency will file a federal tax lien against your assets (unless your tax bill is from 2019).
You don’t have to set up direct debits with these payments plans, but if you have a history of defaulting on agreements, you may have to set up a direct debit or disclose more financial information.
Note that these agreements are only an option if your case hasn’t been assigned to a revenue officer. Once your case has been assigned to a revenue officer, you will have to make a financial disclosure to get an arrangement, and the revenue officer may require you to sell your assets so that you pay off the bill faster. This is why it’s important to act quickly and contact the IRS as soon as possible.
What Happens If You Owe More than $1 Million to the IRS?
If you owe more than $1 million and are not in an arrangement with the IRS, the agency will assign your case to a revenue officer. The revenue officer will look closely at your situation, and they will require you to pay off the tax liability in the fastest way possible.
Contact The W Tax Group for Help
Regardless of how much you owe the IRS, our tax attorneys can help you make arrangements. We have extensive experience negotiating the best possible arrangements with our clients. To talk about your back taxes, contact us today.
Ways to Pay Back Taxes or Avoid Them
It’s important the taxpayer pay their late taxes owed asap. Penalties and interest continue to accrue until the delinquent taxes are paid in full. The first thing to do is determine whether you have any available resources to borrow against to pay off the late taxes or avoid them altogether. This can lead to potential windfall savings for the taxpayer. You can replace or avert a liability by replacing it with a liability that has less holding costs (fees, interest, etc.). Here are some ways you may be able to do that.
Individual Taxpayer Payoff or Avoid
Refinancing Your Home
Provided you own a home and that home has adequate equity and you qualify, refinancing your home to pay off the IRS is a great tax-free alternative. Even with an existing overdue IRS tax liability, its possible you can find a lending institution willing to refinance your home provided you have the income and job history to qualify. Being proactive and doing this prior to any tax lien or tax levy filing is critical. After any filing it will be much more difficult. Dependent on how far along you are in the collection process, finding an institution to refinance the home may not be easy. Nonetheless, there are financing sources such as smaller banks and non-traditional lenders that may be willing to work with you.
Borrow against your whole life insurance policy. You may have a life insurance policy with cash value. You may not want to surrender that policy for its cash value leaving your loved ones with no life insurance. Borrowing against the policy may provide you a tax free way to raise money to erase unpaid taxes and steer clear of the IRS. The loan taken out on your insurance policy will have to be paid back with interest, however, the interest cost of paying back the loan on the policy will pale in comparison to the penalties and interest paid on an IRS tax liability. Any loan must be accompanied by a legally bound contract to repay it.
401K, 403B’s or Pension Plan
If you have a 401k, 403B or pension plan, etc. consider borrowing money from your retirement plan. The IRS has guidelines to follow. In addition, depending on your situation you might qualify for a hardship withdrawal. Borrowing from your retirement plan is not the same as an early withdrawal which can lead to penalties and another tax liability. You will have to pay back the loan with interest for tax reporting purposes.
IRS Rules to Borrow Against 401k, 403B or Pension Plan
For a 401k or 403B your employer must have language allowing loans to be taken by participants. You will want to make sure your plan allows for loans. The loan must be based on a legally enforceable agreement. The loan must be documented and include a date, amount of loan and a schedule for repayment. The loan can be up to 50% of taxpayers balance or a maximum of $50,000.
Borrow money against an asset you own. You may own a business and that business has assets that have value. Due to the ongoing nature of the business you need that asset to operate your business and can’t sell it. However, you may be able to borrow money against that asset using it as collateral.
Borrow money against an illiquid asset. You may own land that has value. However, the land is not something you can sell quickly to remedy your situation. Sometimes the sale of a parcel of land can take months or years. Instead consider borrowing money and using the land as collateral to erase or avoid your tax liability.
Business Ideas, Pay Late Taxes or Avoid
Your business may be profitable yet have payroll 941, trust fund recovery, sales tax problems, etc. Utilizing non-traditional sources of financing for business owners almost always comes with higher interest charges and or fees, however, in most cases they will be far less than the IRS is or would be charging you for unpaid taxes.
Invoice or Account Receivable Factoring (Borrowing Against):
Your business may have an invoice payment cycle longer than others. It may rely on 1 or 2 large customers with good payment history, whom pay very slowly. Your business may have accounts receivables which take time to collect. If able to factor you can reallocate the funds to the IRS. The source of funds for invoice factoring is generally more concerned with your customers ability to pay, not your business.
Family and Friends, Investors
You may be able to borrow money from a family member or friend by offering them equity (partial ownership) in your business.
Borrow Against Inventory
Your business may have inventory of raw materials or finished goods that you can borrow against to get a percentage of their value.
Machinery and Equipment
Borrow against your machinery and equipment. Some lending sources may be willing to advance you a percentage of the liquidation value of these assets.
Owner Occupied Real Estate
Borrow against the owned real estate which houses your business, given it has adequate equity.
If you have the resources to qualify for any of these options, you will almost surely need the services of an experienced IRS Tax Lawyer. They can prepare and review the appropriate paperwork, draw up the agreements, review the existing assets for loan covenants, subordination clauses and pre-payment penalties, etc.
What Will Happen if You Don’t Address Your Back Taxes?
In most cases, taxpayers aren’t fully aware of the consequences they could face for failure to file and pay taxes. When you don’t file your taxes, the IRS can still see what you might owe, and it’s not going to be happy with you.
If you fail to pay your taxes, the IRS adds on huge tax penalties and interest charges, which make your situation much worse than it otherwise would have been. If this goes on for an extended period of time, the severity of the situation compounds. The IRS will take action against you if you wait—it’s only a matter of time. Here you can find out how much you owe the IRS
You don’t want to face these kinds of negative consequences, and that includes calls and letters from the IRS. There really is only one way to resolve issues with your back taxes: Face them. That being said, you don’t have to face them alone. Tax relief lawyers exist to help people like you get help with their IRS back taxes.
Can working with a tax lawyer get you back taxes help?
Yes, a tax lawyer can help you with your back taxes by going over your finances, your income, your other liabilities, your assets, and your personal situation and finding the best legal solution to get your taxes paid off once and for all. Handling this situation on your own is stressful and unnecessary when you can have legal help beside you.
Not only will your lawyer help you figure out how to pay your back taxes, but we can also communicate with the IRS on your behalf, taking some of that negativity out of your life. A few common methods used for resolving back tax issues are listed below:
- Offer in Compromise – An offer in compromise is a settlement agreement between you and the IRS. In some circumstances, the IRS may allow you to settle your back tax liability for less than the full amount you owe.
- Installment Agreements – Installment agreements can be a great way to pay your back tax liability through a monthly plan. You would still have to pay off all of your back taxes owed, but you could do it through an affordable monthly payment.
- Currently Not Collectible – If you truly don’t have the money to pay your taxes, it’s possible to get the IRS to stop collections by proving that your account should be placed in Currently Not Collectible status.
A qualified and experienced tax lawyer with the W Tax Group can help you with any of the above back tax solutions
Process to Get Back Taxes Help
IRS Back Tax Assistance Is a Phone Call Away
There is no liability collector more intimidating than the IRS, and owing back taxes is like having a dark cloud hovering over your life. So if you’re feeling stressed and worried about how to pay off your back taxes, you should realize this issue has been solved thousands of times before and it can be done for you as well.
Get the IRS back tax help you need by calling the W Tax Group today.