IRS & State Tax FAQ

Illinois Tax Problem Guide – IRS & State Tax FAQ

This Tax FAQ will help you answer your most pressing questions. If you would like to schedule a free confidential consultation, call us at 708-598-5999.

Q: I recently received a letter from the IRS demanding payment in full of unpaid taxes, I am unable to pay the full amount, how do I prevent the IRS from taking my property?

A. The IRS has several options other than full payment that will allow you to keep your property, including programs that allow a monthly payment agreement or an offer in compromise. The IRS may even suspend collection entirely without any payment in certain circumstances.  Care must be exercised  however, when working with the IRS to determine the amount of your payment.  If you must pay, you want to be sure to come to a monthly payment figure which you can afford to make while still paying your other expenses.  Like any creditor, the IRS generally wants to collect on their debt at the earliest possible date. In addition, the IRS is a creditor which has extraordinary powers to use when collecting.

Q: Is it true that before I can get a monthly payment agreement I have to file all my tax returns ?

A. The IRS generally requires that an individual seeking a monthly payment agreement must be in compliance regarding tax filing requirements, including the filing of delinquent tax returns.  There are exceptions to this requirement depending on whether the IRS has “filed for you” based on the information the IRS has in its records and the tax year involved.

Q I was recently contacted by an IRS employee seeking detailed financial information, do I have to provide the information?

A: Generally, the IRS requests financial information to prepare a delinquent return or to analyze your ability to pay a delinquent tax.  On the other hand, the IRS may be seeking the information for the purpose of ceasing your property immediately or at a future date. Depending on your individual situation and how confident you are about “where you are” with the IRS, you may decide to work with the IRS yourself or you may benefit by contacting a qualified tax professional to assist you in determining the essential information you are required to provide to the IRS at any given time.

Q: Will I get future tax refunds if the IRS approves an installment agreement payment plan ?

A The IRS automatically applies future refunds to outstanding balances. You must also continue to make the installment agreement payment because any refund is not considered a substitute for the regularly scheduled payment.

Q: The IRS filed a lien against me, will the IRS take my house?

A. The IRS must engage in a lengthy financial analysis before seizing and selling a personal residence. The lengthy analysis generally allows for ample time and opportunity to prevent displacement from you home.

Q: The IRS filed a tax return for me, is there anything that I can do?

The IRS has the authority to file certain tax returns based on available information. It is likely that their information produces a tax liability that is greater than the liability that would have resulted had you filed your return. It is often a good idea to file your own return even if the IRS has “filed for you”.  There are, however, considerations other than simply which tax liability is larger,  the tax from the IRS’s calculation or yours.  Issues such as the applicable statute of limitations period and your overall financial condition  can come into play.

Q The IRS levied my bank account/my wages, what can I do?

A: You must take immediate action to minimize the financial impact by contacting the IRS representative responsible for the Levy. You will generally have less time to act if your wages are levied than if your bank account is levied.

Q: Will the IRS close my business because my business owes past due taxes?

The IRS generally tries to work with business entities that have past due tax liabilities provided the business entity can demonstrate the ability to satisfy current and future filing and paying obligations while dealing with the past due obligations. The IRS generally prefers not to close down businesses, however seizures and levies and liens by the IRS can have that effect, regardless of the IRS’s intent.   The nonpayment of current employment taxes on an ongoing basis is considered to be a more serious tax issue than the failure to make most other types of required tax payments. It is the type of issue which can result in a business being shut down by the IRS and should be dealt with with care.

Q: Should I pay my current or past due business taxes?

A: The IRS generally requires that business entities be in compliance regarding current filing and payment obligations before considering  payment arrangements for past due taxes.  There are, however, exceptions and special arrangements which can be made in any given situation depending on the particular facts, because the IRS is generally not interested in closing the businesses it is  trying to collect from.

Q: My corporation cannot pay the employment taxes, will I personally have to pay?

A: The IRS can, and often does, assess certain responsible individuals with personal liability for employment taxes that were not paid by a business.