Ask the Experts: Contact IRS If You Can't Pay Taxes
June 20, 2011 (The Sacramento Bee) Those who owe back taxes often need help in figuring out their next step. Here with advice is IRS spokesman Jesse Weller.
QUESTION: I retired at age 50 in 2006 and lived off my 401(k). Now I am unemployed and owe the IRS $100,000. What can I do?
ANSWER: One step you should definitely take is to contact the Internal Revenue Service as soon as possible to explain your situation. The IRS can work with taxpayers who are suffering an economic hardship. Communication is the key to minimizing problems. Call the IRS phone number on the notice you received, or call 800-829-1040.
The IRS can discuss hardship relief you may be entitled to, such as postponing collection enforcement. You can also discuss payment options, such as a short-term extension, an installment agreement or an offer-in-compromise.
An offer-in-compromise is an agreement between a taxpayer and the IRS to settle tax liabilities for less than the full amount owed. Normally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement.
In February, the IRS announced its "fresh start" program, which includes new policies to help taxpayers pay their back taxes and avoid tax liens. For details, visit the IRS website at www.IRS.gov.
Two other good resources on the IRS website are the "Tax Center to Assist Unemployed Taxpayers" and "The 'What Ifs' of an Economic Downturn."
If you can't resolve your tax problem with the IRS, contact the Taxpayer Advocate Service. This is an independent organization within the IRS that assists taxpayers who are experiencing economic harm, seeking help with unresolved tax problems, or who feel an IRS system or procedure is not working as it should. You can call the Taxpayer Advocate Service toll-free at 877-777-4778.
If you need legal representation for your tax problems but can't afford it, you may qualify for help from a low-income taxpayer clinic. For free or for a nominal charge, these clinics represent low-income taxpayers and those who speak English as a second language. More information is at www.IRS.gov.
Low-income taxpayers also may be able to receive assistance from referrals operated by their state bar association, state or local accountants, and other nonprofit tax professional organizations.