ASK THE EDD ATTORNEY – WHEN YOU CAN’T PAY YOUR TAXES! HOW TO DEAL WITH THE IRS AND THE EDD
By Robert S. Schriebman
The end of any year can be a time of joy but it can also be a time of great stress. This is especially true if you have outstanding tax obligations to the IRS and the EDD. In the past the IRS knew that people were saving up money for the holidays and embarked upon a campaign of enforced collection especially bank account levies without warning. In recent years, the IRS has backed away from taking taxpayers’ holiday savings. The EDD, however, continues to file tax liens and levy bank accounts.
- When you owe the EDD and the IRS you have the same several options:
- Pay it and be done with it.
- Negotiate an installment payment arrangement.
- Convince the IRS and the EDD that collection efforts should be suspended due to hardship.
- Consider an Offer in Compromise
- Under limited circumstances, a Chapter 7 bankruptcy discharge (discharge is not available for delinquent employee payroll taxes).
On November 6, 2017, the IRS issued press release 2017ARD 217-2, Taxpayers Can Explore Payment Options Any Time of the Year.
In this article we will discuss the IRS press release as well as give you some practical advice on the options listed above.
New IRS Press Release
The new press release is informative but it assumes, as its major premise, that the reader has the ability to fully pay what he or she owes. Before getting into specifics, I have learned one great lesson over the almost 5 decades that I have been handling tax problems. Let me pass it onto you. If you owe the EDD or the IRS, and you can pay in full, even if it hurts, do so and get the government out of your life. Don’t play games with the system and do not seek counsel for how to avoid payment.
The IRS press release gives you several electronic options for paying your taxes other than writing a check. What’s wrong with writing a check? Nothing! I have had cases where both the IRS and EDD misplaced one or more payments. If you pay electronically, you may have proof that you made the payment, but you may not have any proof as to what the EDD or the IRS did with your money. If on the other hand, you have a cancelled check, the government endorsements on the check have codes for where your money was sent within the system. The payment can be traced and properly applied. Try doing that with an electronic payment.
IRS Payment Options
Option 1: When you e-file your return, you can also use electronic funds withdrawal.
Option 2: Use IRS Direct Pay. This allows you to pay electronically directly from your savings or checking account. There is no charge. You can choose to receive an email notification about your payment. However, the IRS warns to be weary of email schemes. Throughout this year I have attempted to keep you up to speed with the latest IRS press releases on electronic frauds and schemes.
Option 3: Pay by credit or debit card through a card processor for a fee. You can make these payments on line, by phone or via mobile devises with the IRS2Go app.
Option 4: “The 7-Eleven option” – Most 7-Eleven stores offer this service. You can pay with cash or with a credit or debit card, visit IRS.gov/paywithcash and follow the instructions.
Option 5: For smaller liabilities, you can work out an installment payment arrangement online by going to the IRS.gov website.
Now that we have discussed the new IRS press release, let’s visit the other options mentioned at the beginning of this article.
Thoughts On Negotiating an Installment Payment Arrangement
It is very important, of course, to make accurate and complete financial disclosures when completing the required personal or business financial statements required by the IRS and the EDD. Equally important is to provide timely backup documentation required by the EDD and IRS collectors. Perhaps most important of all is that the taxpayer be current on all filing and payment requirements, such as, timely and accurately making quarterly estimated tax payments.
Thoughts On Convincing the IRS and the EDD That Collection Efforts Should Be Suspended Due to Hardship
Here you must show the tax collector proof that your expenses equal or exceed your income. This may be due to economic conditions or to illness of yourself or a member of your immediate family. Even when collection is suspended, interest on your unpaid taxes continues to accrue. Hardship suspensions usually last no more than two years at which time you will be contacted for a reevaluation of your financial condition. In other words, economic hardship suspensions are not permanent.
Thoughts On Considering an Offer in Compromise (OIC)
An OIC can be a life saver. If your offer is accepted the tax debt is written off and the tax lien will be removed. Your credit rating may be restored. In my experience I have found that a taxpayer must have realistic expectations. I have often seen cases where the taxpayer seeking an OIC has the ability to fully pay what is owed if he or she will sell or refinance one or more real estate holdings. Being cash poor does not automatically make one a candidate for an OIC.
Thoughts On Limiting Circumstances, A Chapter 7 Bankruptcy Discharge (discharge is not available for delinquent employee payroll taxes).
The best advice I can give you in this area is to interview several bankruptcy attorneys in order to find one who really understands taxes and their dischargeability. There are a lot of bankruptcy attorneys out there, but only very few know how to discharge old tax debts and the taxes that are eligible for discharge.
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 “California Tax 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.
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