As a Matter of Tax

The hardest part about being a tax attorney is understanding how the non-attorney mind works. I recently reviewed Taxpayer Advocate’s Taxpayer Roadmap document and within a few minutes I understood it with relative ease. I then showed the same Roadmap to my colleague – a marketing extraordinaire but definitely not an attorney – who promptly asked me if I was okay.

That exchange is a microcosm for what I believe is a disconnect between how most Americans think the IRS works, and how the IRS actually works. Candidly, it’s also why tax professionals stay busy.

One such disconnect is with the concept of an Installment Agreement – a payment plan to repay tax balances over a fixed period of time. Call it the IRS’ proverbial olive branch for taxpayers who can’t pay their entire tax bill at once.

I see a lot of similar behaviors and patterns with clients who owe the IRS and want to repay it: they bring me the stack of IRS letters they’ve ignored, explain (validly) why they’ve done so, then ask me what it’ll take to make it right.

Did they really need me to tell them about IRS payment plans?

There are two areas of disconnect here: an informational disconnect, and a know-how disconnect. It’s also the two areas of strength for many tax professionals. The former refers to clients who didn’t know they could pay their tax bill off in installments. The latter refers to clients who knew, but didn’t want to or could not actually set up the payment plan.

So, now we know that tax payment plans are a thing. How do you set them up? The good news is that taxpayers who owe less than $50,000 qualify to set up a payment plan entirely online on the IRS’ website. The bad news is many taxpayers report issues with the online service, between generic errors, crashes, and the website simply being down.

But that’s it. A max of $50,000. The online system literally can’t handle the math involved for higher balances. It also won’t tell you whether you qualify for a first-time penalty abatement, which can save you a good chunk of change that you’d otherwise have to pay through the installment agreement.

And for the group of taxpayers who can’t file online due to errors, glitches, a high tax balance, or because they don’t own a computer (remember, about a quarter of American households don’t own computers), the other option is to call the IRS directly.

Look, there isn’t much that I do for clients that the clients couldn’t do themselves. That doesn’t always mean that they should. Imagine waiting on hold for hours with the IRS to set up a payment plan only for them to ask you to fax a a completed Form 433D. I’m not sure what’s worse – having to fill out an IRS form on your own or figuring out where the nearest fax machine is.

Knowing what to do, how to do it, and how to avoid unnecessary costs or delays is where professionals come in. So before you take on the IRS alone, consider getting help. It could save you time, money, and a lot of frustration.