What to Do When You Just Can’t Pay

So the Revenooers are after you, badgering you constantly about your delinquencies, and generally making a major pest of themselves, and doggone it, you just don’t have the dough to pay and get them off your back.

In particular, say you’ve received one of the following notices:

  • Notice of Federal Tax Lien Filing
  • Notice of Intent to Levy
  • Notice of Jeopardy Levy and Right of Appeal
  • Notice of Levy on Your State Tax Refund
  • Notice of Levy and Notice of Your Right to a Hearing

If this is you, it’s likely that you’ve already had a fair bit of contact with Uncle Sam, in his effort to collect what he thinks is due.  In any case, receipt of one of the notices listed above will usually get your immediate attention, and in many cases, one of the first things you should consider is to request a “collection due process or equivalent” hearing.  There are time limits within which to request a timely collection due process (CDP) hearing.  But even if you miss those, you can still request an “equivalent” hearing, though submission of such a request will not prohibit levy or suspend the 10-year period for collections which is available to IRS.

Get hold of IRS Form 12153 with which to make your request.  It’s a simple, straightforward two pager (mostly routine information – name, address, type of tax and year(s) involved).

The Form also asks that you give a reason for requesting a CDP hearing, which can be as simple as merely stating, “I cannot pay my taxes.”  And the instructions to the form even provide some examples of situations in which this plea for mercy just might work, including:

  • You have a terminal illness or excessive medical bills;
  • Your only source of income is Social Security payments, welfare payments, or unemployment benefit payments;
  • You are unemployed with little or no income;
  • You have reasonable expenses exceeding your income; or
  • You have some other hardship condition.

Obviously, this process is not for everybody – wealthy folk with lots of assets, though

at odds with IRS over unpaid taxes need not apply.  In today’s world, though, there are likely more than a few, out there, for whom this simple process may be the answer.

CONSULT YOUR TAX ADVISOR – This article contains general information about various tax matters.  You should contact your CPA regarding the implications to your particular situation.

Jeff Quinn, the author of this article, is a shareholder in Ashley Quinn, CPAs and Consultants, Ltd., with offices in Incline Village and Reno.  He can be reached at 831-7288, welcomes comments at jquinn@ashleyquinncpas.com, and invites readers to consider his other commentary at http://blog.nolo.com/taxes.

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