The IRS Entrepreneurs’ Rescue Plan

If you haven't been paying taxes quarterly, and don't have the cash, there is hope and help

but not enough to cover all your debts? “I generally advise clients to put any money they have toward their next year’s estimated taxes-1999, in this case,” says Moragne. “By doing so, you’ll restrict your tax problems to one year: 1998. If you start to fall behind for two or more years, you may never catch up.”

According to Moragne, the IRS usually reacts well to proposals for extended payments if the amount involved is under $10,000. “Taxpayers typically will be allowed to spread repayment over three years,” he says.

Larger tax deficiencies, though, are another matter. “The IRS has a series of financial statements-Forms 443 (a),(b), (d) and (f)-that you’ll have to fill out. From these statements the IRS will determine how little of your income you’ll need to live on and how much you can afford to pay.”

Don’t rush to fill out these forms before seeing your tax advisor, Moragne cautions. “You don’t want to lie and you don’t want to omit information that’s on the public record,” he says. Don’t say you have one car if you have three cars registered with the motor vehicles bureau, for example. Other issues need to be considered, though. The IRS will ask for a list of your accounts receivable. If you provide this list, the IRS will attempt to collect from your customers, who may never do business with you again. Therefore, providing this list might put you out of business. “Before deciding how you want to proceed,” advises Moragne, “meet with an experienced tax professional who can spell out all the possible consequences.”

“Many taxpayers get very emotional when they receive correspondence from the IRS,” says Torella. “You’ll save yourself a lot of stress by hiring someone who knows how to deal with the IRS.” In practice, Moragne says, most tax delinquencies eventually are settled, usually through an installment agreement.
At the same time, you should be realistic about what you can afford to pay. “Don’t agree to pay so much that you’ll strain your finances,” Moragne says. “If you don’t make the agreed-upon payments, the IRS will assert that you’ve broken your agreement and go after your income, your house, your car,
your bank account and so on.”

To avoid such harsh measures, Moragne counsels taxpayers to stay in communication with the IRS. “When the IRS moves to attach your income and your assets, the agency is just trying to get your attention. You can save yourself a lot of grief by showing that you’re aware of the problem and doing everything you can to get it settled.”

You’re Not Alone
If you come up short on cash and have to make a deal with
the IRS, don’t be embarrassed. Millions of taxpayers enter
into installment agreements with the IRS every year,
and the number has increased in recent years:

Fiscal Year

Number Of Taxpayers With Installment Agreements

Total Dollar Amounts

1991

1.11 million

$ 3.869 billion

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