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Stopping the Machine

By Orlando Gotay, Tax Attorney

Not long ago someone sent me a YouTube video showing a huge machine that actually eats cars. This amazing monster had enormous rotating teeth that would literally shred an automobile to pieces. Yes, I watched all the way to the end, wondering what would happen to the motor. (It was torn to pieces as well).

As part of my practice I get calls from folks who are facing the mighty IRS collection computer. I imagine people think the IRS is much like the car-eating machine: relentless, vicious, powerful. Well, that’s true, except for one key detail. The taxpayer has the control panel in hand. Yes, actually one can stop the machine.

One obvious way is paying the amount owed in full. For many reasons, that may not be feasible. If the tax liability is small enough, less than US$10,000, you may qualify for a “guaranteed” installment agreement. You will be able to pay off the debt in more affordable pieces. It does accrue penalties and interest, but since you will be paying off the principal, accruals will be smaller over time. And the big thing, the really big thing in my opinion, is you put the monster to sleep. With an installment agreement in place, there will not be any enforced collection activity, such as a levy against your accounts. There are few things more distressing to check an account balance only to have it unexpectedly show a goose egg.

Larger liabilities (total tax, penalties and interest) up to US$50,000 can be managed by “streamlined” agreements. Like “guaranteed” agreements, these will stop collection activity. The approval of these agreements does not require submission of financial information to the IRS for collection purposes. Both types of agreements can be done online at irs.gov. No human interaction needed. Streamlined may require a direct debit, and as a matter of practicality, I strongly encourage people to do so anyway.

Do you owe more than US$50,000? Paying up front enough to get under US$50,000 enables you to ask for a streamlined agreement. Those who owe more than US$50,000 may really wish to consider this, as the agreement takes them out of the list of people who will not get their passports renewed. Oh, did that get your attention?

Temporary patch is “currently not collectible” status if your financials show there just isn’t enough to collect. The account is suspended but the computer will look at you from time to time. As with the other options, interest compounds and penalties accrue daily, so this is strictly a temporary solution. Want to see the car video? http://tiny.cc/careater

Orlando Gotay is a California licensed tax attorney (with a Master of Laws in Taxation) admitted to practice before the IRS, the US Tax Court and other taxing agencies. His love of things Mexican has led him to devote part of his practice to the tax matters of US expats in Mexico. He can be reached at tax@orlandogotay.com, online radio at mixlr.com/orlandogotay or Facebook: GotayTaxLawyer.

 

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