You may not be surprised if I told you that a meaningful percentage of Americans have some type of outstanding debt with the IRS. Whether it’s an amount due but not paid with a return, the result of an audit, or the reversal of a credit, handling these debts can be very burdensome to the taxpayer. Many cannot simply write a check to pay in full.
Let’s hope that readers who are in this boat do not stick their head in the sand. Ignoring the IRS is not smart. As the IRS computer detects no contact from the taxpayer, it will gradually invoke harsher mechanisms. Levies, seizures, liens are all part of the IRS arsenal.
One way to manage an overdue account is through an Installment Agreement (“IA”). Like the name suggests, IA’s allow taxpayers to make affordable regular payments. In exchange, the IRS will stop pursuing enforced collection action. (Sometimes referred to as calling off the dogs).
In its infinite wisdom, the IRS created online IAs. Normally meant for smaller value accounts, their use was so popular, (and saved the IRS valuable manpower time), that it has now instituted a pilot through 2017 to allow larger accounts to be eligible for streamlined submission online. These are more quickly and almost automatically approved, and dispense with the need to file detailed financial information with the IRS. Many prefer to have toenails pulled than filing an IRS financial disclosure form. So, that is good news.
One expanded criterion being tested immediately is this: Individual taxpayers with a balance owed to the IRS of tax, penalty and interest between $50,000 and $100,000 may experience accelerated processing of their installment agreement request.
The downside? Due to recent, (and very public), data breaches, the IRS has tightened its online security criteria. To get an online account, one will need, (among other things), a U.S. credit card with a U.S. address, (the final 6 digits are used for verification of this), and a U.S. postpaid cell phone number with a verifiable U.S. address. Soft numbers such as Skype, Google voice, prepaid or international numbers will not count for verification. So, expats may have to skip online and file on paper.
I wrote to the IRS National Taxpayer advocate to share my thoughts on how difficult these well-meaning security features hamper U.S. taxpayers overseas. The issue was noted. But for now, your Installment Agreement may actually have to be on paper—the old fashioned way…even if it is “Streamlined”.
Orlando Gotay is a California licensed tax attorney (with a Master of Laws in Taxation) admitted to practice before the IRS, the U.S. 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 U.S. expats in Mexico. He can be reached at firstname.lastname@example.org.