IRS updates Collection Financial Standards for 2021

Yesterday, the IRS updated the Collection Financial Standards that define allowable living expenses for individual tax debt cases.

You can find the updated standards here.

To prepare you to apply this update, Dan will be presenting an updated version of CTR-111: IRS Collection Financial Standards & Form 433-A next week, on May 5.

Course objectives for this 2-hour CPE class are to:

  • Understand the purpose and application of IRS Collection Financial Standards
  • Explain each individual expense category and how to apply them.
  • Understand the purpose of IRS Form 433-A & 433-F.
  • Complete the Form 433 Income & Expense Table (IET).

Financial analysis is one of the two critical first steps you need to take with every Collections case, so it’s something you need to stay up to date on. For complete details and registration, visit:

https://www.eventbrite.com/e/ctr-111-irs-collection-financial-standards-for-individuals-form-433-a-tickets-152404123837

Academy Members: Attend via the link on the Events calendar.… Continue reading

Ultimate Guide to IRS Currently Not Collectible Status

The Internal Revenue Service’s collection of tax debts is supposed to be completed in a fair and equitable way. Taxpayers are classified into categories based on specific factors, and the different categories are referred to as a status. Status 53 is a category of classification used by the IRS for people who owe tax debts but who are not currently able to pay what they owe with their current income and still keep a roof over their heads. People who are categorized as being in Status 53 are considered Currently Not Collectible, or CNC for short. The Currently Not Collectible status means that the IRS will temporarily stop enforcement efforts until and unless the taxpayer’s financial situation improves and allows them to repay what is owed.

When accountants and tax attorneys have clients who simply do not have the assets or income to pay their tax debts, the CNC status might be an option. For other clients who have the ability to pay a portion of their tax debts within a reasonable time but not their entire balances, an Offer in Compromise might be a better choice. While the Collections division of the IRS will generally try to get taxpayers to enter into payment plans to repay their debts or take other enforcement measures, it is possible for experienced tax professionals to help some clients be deemed to be in Status 53 to provide them relief at least temporarily.

What is Currently Not Collectible status?

Status 53 or currently not collectible (CNC) means that a taxpayer will not have enough money to pay for their basic living expenses if they are required to make monthly payments to the IRS through an installment agreement. Under IRM 1.2.6.14, a tax debt might be deemed to be currently not collectible when a taxpayer does not have any income or assets the IRS can levy to enforce the debt. However, the IRS might also place a taxpayer in currently not collectible status when the enforcement of tax debt through payments would cause him or her to be unable to meet his or her basic living expenses. To determine whether this might be true, the IRS will evaluate the taxpayer’s finances to determine whether the taxpayer would face a true hardship through tax payments instead of simply being placed at an inconvenience.

The IRS can deem a tax debt as uncollectible when the taxpayer submits enough financial documentation … Continue reading

Ultimate Guide to IRS Installment Agreements

Many taxpayers find themselves unable to pay their full tax balances when they file their income tax returns. Some common reasons that people might have for being unable to pay their taxes to the IRS include increased investment returns, more self-employment income, bonuses, and salary increases. When a taxpayer is unable to immediately pay his or her tax debt, making payment arrangements will likely be necessary.

The most common type of payment arrangement taxpayers can make to take care of their tax balances is an installment agreement. With this type of arrangement, taxpayers will make monthly payments to the IRS. In most cases, the payments are made by payroll deductions or direct debits. The set-up fee for a direct debit agreement made online is $31. If the direct debit installment agreement is created over the phone, in-person, or by mail, the set-up fee is $107. Fees can be waived for low-income taxpayers.

If the taxpayer enters into an agreement to pay by other methods, the online set-up fee is $149. If the application is made in-person, over the phone, or by mail, the set-up fee is $225. Low-income taxpayers will be charged a set-up fee of $43.

During the installment agreement, late-payment penalties and interest will continue to accrue. However, the late-payment penalties will be halved during the months during which an installment agreement is effective. Installment agreements can be set up by calling the IRS, using the online payment agreement or OPA tool, or filing form 9465. Here is a guide to what you need to know about IRS installment agreements.

Understanding IRS installment agreements

Taxpayers are responsible for meeting their obligations when they owe outstanding tax liabilities to the government. When a tax liability is overdue, the taxpayer will incur monthly late-payment penalties and added interest. To avoid added charges, taxpayers are advised to pay their balances in full. However, some taxpayers are not able to do so. When taxpayers cannot pay what they owe in full, the IRS allows them to enter installment agreements to make monthly payments.

Taxpayers have the following options when they make payments:

  • Payroll deductions
  • Direct debits
  • Payments through the Electronic Federal Tax Payment System
  • Credit card payments
  • Check or money order payments
  • Payment by the OPA

 

Streamlined IRS Installment Agreements

Streamlined installment agreements are available to individual taxpayers who owe less than $50,000 under IRM 5.14.5.2. This includes all unpaid assessments but does not include … Continue reading