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Depending on the amount you owe and how long you’ve delayed paying your back taxes, the IRS can be aggressive in its collections actions. If you receive form CP90, this is your final warning from the IRS to reach out and solve your tax problems before they levy your assets, tapping into your bank account to retrieve the money you owe.
You have 30 days from the date on the letter to take action if you receive form CP90.
By the time you receive form CP90, you are probably well aware that you owe the IRS money for unpaid taxes. Perhaps you don’t have the money to pay and even thinking about the situation causes stress. Maybe you’ve been dealing with job loss, medical issues, or other challenges that make it difficult to think about your financial situation.
Before you receive form CP90, you should have gotten:
Whatever your reasons for ignoring the other IRS collections notices, the CP90 could be your last chance to resolve your back taxes without a court appearance or a levy on your assets.
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When the IRS levies your property, they are allowed to take your wages, seize your personal property including vehicles, and can even take your house or other real estate you own.
You can avoid a levy by getting in touch with the IRS promptly after receiving form CP90, but it’s important to take the appropriate steps based on your specific financial situation.
A CP90 form could feel like a dire situation. But even if you’ve put off paying your outstanding taxes for three to six months, you still have options.
Think carefully about your situation and contact a tax advisor if you aren’t sure about your best course of action.
1. Pay your past due taxes.
If you have the means of securing the money you need to pay your taxes, due so. Some options could be paying your taxes with a credit card, taking out a home equity loan or home equity line of credit (if the IRS hasn’t placed a lien on your house), or securing a personal loan. You may also be able to borrow money from family or friends. Nearly any option – aside from a predatory, high-interest payday loan – will be a better choice than ignoring the IRS’ collections actions.
2. Request a payment plan from the IRS.
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The IRS has a variety of payment plans and installment agreements available for taxpayers. The plan you apply for, and the fees associated, vary depending on how much you owe, how you apply (online or by phone) and whether or not you qualify for Low Income Taxpayer Status.
You can request a short-term agreement if you can pay the past due amount in full within 120 days. Otherwise, you’ll need to fill out form 9465, Installment Agreement Request.
3. File for currently not collectible (CNC) status.
If your income is below a certain level and you can’t pay the taxes owed without undue financial hardship, you may qualify for CNC status. This puts a hold on any tax liens or levies and stops collections actions from the IRS, aside from an annual tax bill. The IRS may review your income and expenses yearly to see if your status has changed and you can pay your back taxes. Keep in mind, penalties and interest will continue to accrue if you are listed as CNC, so if your financial situation improves, you will owe more than you did when you filed.
4. File for an offer in compromise.
If the IRS has reason to believe they won’t collect the full amount you owe, but you have the means to pay a portion of your tax bill immediately, you might be able to make an offer in compromise.
Sometimes, an offer in compromise is part of an installment agreement or a partial pay installment agreement. You can pay a lump sum of your back taxes upfront, and pay the rest, or a portion of the total amount, in monthly payments over a period of up to six years.
5. Request a Collection Due Process hearing.
If you do not agree with the tax bill, or you believe the IRS has not followed due process in trying to reach you about your outstanding back taxes, you can request a Collection Due Process or Equivalent Hearing.
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Filing for a hearing will put a stop on any levies or further collections actions until your hearing takes place. To request a hearing, file Form 12153, Request for a Collection Due Process or Equivalent Hearing.
At the hearing, you can appeal the intent to levy, show any errors in your assessed tax liability to reduce your tax bill, or prove that you made the payments in a timely manner. The hearing gives you a platform to appeal any decisions made by the IRS regarding your past due back taxes.
6. Find a tax professional to help you negotiate an agreement with the IRS or to represent you in a hearing.
Whichever step you decide to take in the name of handling your back taxes, it’s wise to consult with a tax expert, such as an IRS enrolled agent, tax attorney, or Certified Public Accountant (CPA).
A tax professional can represent you and negotiate on your behalf with the IRS. The tax expert can help you fill out and file Form 2848, which gives them the Power of Attorney to represent you on phone calls, in court hearings, and in any negotiations.
Form CP90 is your final notice from the IRS that the agency plans to levy your assets to cover your unpaid back taxes.
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If you ignore Form CP90 and the IRS has followed due process, the agency can seize the funds in any of your bank accounts. Tax collectors can also seize W-2 or 1099 wages, as well as social security income.
If you don’t have the funds available to cover the full amount, the IRS can seize personal property, including vehicles, jewelry, collections, and anything of value. The agency can also put a lien on your assets, including wages, vehicles, and real estate, making it harder to sell your home or land.
A lien may also show up on your credit reports from the three major credit bureaus, making it more difficult to take out a loan or obtain credit.
If you owe more than a certain amount, Form CP90 also gives the IRS permission to allow the State Department to revoke your passport. If you apply for a passport, the application could be denied, making travel to foreign countries impossible.
As bad as it sounds to receive a “final notice” regarding your past due taxes from the IRS, you still have 30 days after the IRS issued the letter to take action. Make sure to check the deadline date on the letter. Sometimes, the IRS will delay mailing the letter or there will be postal delays that could give you less than the full 30 days from the receipt of the letter to take action before a levy occurs.
You don’t want to start negotiating with the IRS on your own, or represent yourself in a Collections Due Process hearing, once your account has reached seriously delinquent status. There is too much at stake.
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Let Solvable help you find a highly qualified back tax assistance firm to act as your representative and resolve your tax issues once and for all.