What if I owe $25,000 or less in IRS back taxes? (IRS)

All IRS Back Tax Help comments are in blue.  If you have any questions on this topic, please refer to BP4.

If you know you need to take action, read my thread about whether or not you should hire someone (You should not automatically) titled “Owe IRS back taxes? When, who, and how do I hire IRS back tax help?”

As usual,  If you like the tone of these posts, contact me for consultation.  I can be reached at irsbacktaxhelp@gmail.com.  Before you email me, please click on and read “About irs back tax help”.

IRS link to sign up online for IRS installment agreement if you owe less than $25k

Do not hire IRS back tax help unless one of the following three reasons suits your needs.  

If you owe less than $25,000 to the state or IRS, I always encourage people to try to handle the past due taxes on their own first.  Why?  Because I like to deliver ROI to people who hire me.  

When you owe less than $25k, it is hard to justify attorney’s fees to solve the problem.  There are three reasons you should consider representation if you owe $25k or less in over due IRS taxes:

1.  You simply don’t have the time.  If you are the primary revenue generator in your job or your business, have someone else handle this.  They will eliminate the guess-work, and won’t make any missteps if they are reputable, experienced, and can cover the IRS coast to coast.  Another way to phrase this is by the hour.  If your time is worth more than $250/hr, you should find someone who cost less per hour.  There are national reputable companies whose hourly rate are less than that, and you can bill your time to help solve your problem.  If your time is worth more, and you spend the time to deal with the IRS.  You are losing money and paying out money simultaneously.  Which does not pass the common sense test.  

2.  You have lost control of the situation.  If you have an IRS bank levy, an IRS wage garnishment, or IRS asset seizure, it means you have lost control of the situation.  If you do not think you have, you are wrong.  The IRS is now in control of your bank account, your paycheck, or your equity.  If this is happening to you, lawyer up.  There is a better/cheaper way to solve your back tax problem.

3.  Whatever the IRS is demanding to pay your back taxes doesn’t make sense.  If the IRS installment agreement, or wage garnishment, or full paying the over due tax will damage your immediate future, or your life over the long haul, don’t agree to it.  If you owe back taxes, there is a solution that will pass the common sense test, insist on it).  If you feel like their solution to solve your back tax problem will cause other problems, do not agree and ruin your life, get help now from someone who can fix this problem and allow you to recover and move forward with your life.  

How do I handle the IRS if I owe the IRS 1040 back taxes of $25,000 or less?  

(this is for 1040 income taxes owed.  If you owe IRS 941 payroll tax the rules are different.  If you have IRS payroll tax problems, email me or post your questions here.  The IRS is more strict about payroll tax solutions.)

“You can make monthly payments through an installment agreement if you’re not financially able to pay your tax debt immediately. Before you apply:

• File all required tax returns;” This is a show stopper. File even if you can’t pay.  IRS failure to file penalty is 22%.  Do not wait.
• “Determine the largest monthly payment you can make ($25 minimum);”  Be selfish here, don’t over obligate and create other problems for yourself.  

“Apply for an installment agreement

• Apply online if you owe $25,000 or less in combined individual income tax, penalties and interest;
• Complete and mail Form 9465, Installment Agreement Request (PDF). If you owe more than $25,000, you will also need to complete Form 433-F, Collection Information Statement (PDF).”  If you owe more than $25k, hire someone.  Make sure they have a good reputation and track record, but hire someone.  They will handle it better than you will and save you money.  

“Understand your agreement, avoid default

Penalties and interest continue to accrue until your balance is paid in full.” For some reason, people think this stops if you enter a formal agreement.  It does not.  No matter what the Revenue Officer says.  “If you are in danger of defaulting on your payment agreement for any reason, contact the IRS immediately. The IRS will generally not take enforced collection actions:”  There are legal restraints, make sure they are honored.  

• “When an installment agreement is being considered;
• While an agreement is in effect;
• For 30 days after a request is rejected, or
• During the period the IRS evaluates an appeal of a rejected or terminated agreement.”