Should you take a Vacation from your Tax Problem?
The IRS issued a News Release on 3/25 that they were suspending most collection efforts including the requirement to make monthly payments on installment plans. No new levies and liens will be started by the Automated Collection System until 7/15. Additionally, they will stop issuing certificates to the State Department requesting that a taxpayer’s passport be suspended.
The pressure is off. Is it time for a vacation? The answer is “No” when it comes to planning on how to get out of this hole. The IRS uses the Form 433 to gather information from delinquent taxpayers about their future income. This information is input into a formula called the “Reasonable Collection Potential” to produce a number that they should be able to collect. Running your numbers through this formula in advance will allow you to make a better deal.
For example, the formula says you should be able to pay $1,000 per month on the past due debt. However, one of the allowable expenses in the formula is term life insurance. Great! You can sign up for life insurance and reduce your monthly payment to the IRS by that amount. Your family gains some protection at no additional out of pocket cost.
But there is a kicker. For that new life insurance premium to be included by the IRS in its calculations, you must show those payments being made for at least the last three months. This is why the vacation needs to wait until the planning is done. To be ready for the flurry of activity that is sure to happen after the pandemic scare passes, you need to have your plan in place and implemented before they contact you with that threat of levies and liens.
If you or someone you know has received a Notice of Intent to Levy or some other federal or state tax issue, please feel free to contact me at either (352) 317-5692 or email email@example.com