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Ask The EDD Attorney – When You Can Pay The IRS…And When You Can’t

By Robert S. Schriebman

April 29, 2015

Introduction

I am a skeptic by nature. For example, I am not convinced that our economy has made a material recovery since the 2008 crash. My tax law practice still sees clients depressed and panic-stricken because they have not filed tax returns or paid taxes for many years.

I get daily calls from small and medium sized businesses facing EDD audits for treating their workers as independent contractors instead of employees.  They did this to save payroll and withholding taxes in order to allow them to be competitive.

IRS Tax Tip 2015-61

This article will discuss a recent IRS public service announcement (Tax Tip 2015-61) discussing the various methods of paying taxes but also giving advice on what to do if you cannot pay those taxes.  In other words, if you can’t pay your taxes should you file your return anyway?

I have been representing people who owe taxes and cannot pay taxes for close to four decades.  I believe I have some insight into this area.

How To Pay The IRS:

Paying Electronically

First, never send cash, i.e., currency.  The IRS prefers using modern electronic payment options. The IRS has a new “IRS Direct Pay Method.” This can be accessed by going to the IRS website at IRS.gov and using “Access Direct Pay” this will give you an instant confirmation and it is a secure site. You can also access IRS.gov and click on “Payments” tab near the top left of the home page.

You can also pay the IRS with your debit or credit card but your card company will charge you a processing fee.

You may also enroll in the Electronic Federal Tax Payment System (EFTPS). This will allow you to pay your taxes electronically by using the internet or your telephone.

Paying by Paper Check

I am one of those old fashioned people who prefer to pay with a paper check. I like checks because in the event that the IRS does not have a record of my payment all I have to do is send them a photocopy of the front and back of the canceled check. The IRS codes the back of a paper check with a complete history of when the payment was made and where it was applied. Paper checks also allow me to direct where my payments are to go.  For example, if I have a client who has not filed several years of returns and has a limited amount of money I can direct the application of payment to a specific year or to a specific portion of the deficiency. There are long standing Revenue Rulings that bind the IRS to my designations. This is especially important when paying back corporate payroll taxes.

When You Can’t Pay Your Taxes

For many people April is not a happy time. It is tax time. Business has not been good. Hard choices had to be made. The question that I regularly get this time of year is “I can’t pay my taxes, should I file my return anyway? The answer is “yes.”  The IRS and FTB have failure to file penalties that are added to your bill in addition to failure to pay penalties. Pay as much as you can, this will reduce penalties and accruing interest. The IRS has recorded message at its Tele Tax site at 800-829-4477, select Topic 202, Payment Options.

When you owe taxes and cannot pay in full several payment options have historically available to you. This is a subject of another article.

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Robert Schriebman has a successful practice in the Rolling Hills Estates area of Los Angeles County serving clients throughout California and the United States. He has successfully dedicated more than 40 years to helping individual taxpayers, business owners, CPAs, Enrolled Agents, and tax attorneys navigate the complicated tax systems of the federal and state governments.

Robert Schriebman has written the only 2 books ever published dealing with how California Employment Development Department (EDD) operates.  See “CaliforniaTax Collection Practice and Procedures” and “California Taxation Practice and Procedure”, both published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House.

Robert Schriebman has written over 20 books including the major manual used nationally by practitioners and the IRS, “IRS Tax Collection Procedures – A Manual for Practitioners” published by Commerce Clearing House in addition to the only 2 books ever published dealing with how California Employment Development Department (EDD) operates.  See “California Tax Collection Practice and Procedures” and “California Taxation Practice and Procedure”, both published by Commerce Clearing House.