If you owe backtaxes to the IRS and can't pay who do you go to?

September 18, 2023 5:35 PM

If you owe backtaxes to the IRS and can't pay who is the most reputable organization to represent you to the IRS? I know there are a ton of orgs out there that claim to do this but I have no idea where to start. More details inside.

Longer explanation as brief as I can.

-Had our second born child December 2019.
-Worked from 12/2017 until 05/2020 when COVID laid off my position. I was due to be hired on full time with the company after 3 years but due to the lockdowns and timing it didn't happen in time.
-Spent the next 14 months unemployed having to live off of savings. Could not find ANY work.
-Went on mortgage forbearance, still had to pay out of pocket for diabetic and child health expenses, (medicine, doctors visits, bloodwork etc) on no insurance.
-Brought back to previous company July 2021 for 5 months on a 4-day a week basis in the hope of getting hired full time again. Did not pan out
-Had to take another job that November 2021. Worked until May of 2023 and was laid off again and finally just got employment beginning of August.

During the re-employment period I was (incorrectly) advised by the government that I would be able to cash out retirement plans early with no penalty, (you COULD short-term but it was not clear in that you'd have to repay it within a certain time period) to pay for COVID-related expenses.
-I had cashed out twice from my IRA once for living expenses/food/bills and in October of 2021 I repaid a years worth of mortgage forbearance on my house to get back to current standing.

I owe about 11k in taxes according to the IRS and another $4400 from 2023 I could not pay at the time in full. I did a partial $3500 in April when I found out the last job would be ending.

I know you can petition IRS court to have amounts reduced for hardship or other reasons. Do you do this yourself or go through some kind of agency or company to handle it for you? Do you pay them as an intemediary? If so who is reputable company for representation to use?

Really appreciate answers here this is just a shitstorm for me.

posted by PetiePal to Work & Money (12 answers total)

Response by poster: I'll add that right now I basically have very little liquid savings at this point. We're living barebones paycheck to paycheck, I've received 2 paychecks to date with the lag for deposits etc. The majority right now has gone to 2 months of mortgages and 2 months of car payments. It's a shitty situation but we, like many others, have had a really hard time recovering from the pandemic years as we bought our house in summer of 2019, had our daughter 3 months later and then locked down 3 months after that starting off this hellstorm.
posted by PetiePal at 5:43 PM on September 18, 2023

Do you qualify for free legal aid? Search for a tax clinic in your state, run by a law school or legal services corporation grantee. If you qualify they may be able to represent you, or at least give you guidance on how to file for a hardship waiver.
posted by Sukey Says at 6:08 PM on September 18, 2023 [1 favorite]

Right. Here is an example for New York so you have an idea of what you're looking for.

in October of 2021 I repaid a years worth of mortgage forbearance on my house to get back to current standing

This is going to sound weird, but do you mind telling me if you have an FHA mortgage?
posted by praemunire at 6:21 PM on September 18, 2023

Response by poster: I didn't put the full 20% down but I think I did around 13-15% at the time. We were at the point where our second kid was on the way and we needed a house.
posted by PetiePal at 7:36 PM on September 18, 2023

The IRS has a variety of payment plans, which might be helpful. You can reduce the amount quite a bit if you spread it out over a longer timespan.
posted by Alensin at 7:59 PM on September 18, 2023 [3 favorites]

Yes, the IRS won't be coming in to kick down your doors at midnight. They mostly want to get you on some payment plan.

(I didn't put the full 20% down but I think I did around 13-15% at the time.

The reason I was asking is that most of the federally-backed mortgages were entitled to some form of deferral that would kick their CARES Act forbearance accruals to the end of the loan (at zero percent). I hope your servicer didn't hustle you out of that entitlement. Not directly relevant to your question, sorry, as I don't think it can be fixed now.)
posted by praemunire at 9:10 PM on September 18, 2023

I negotiated myself on behalf of a relative. I called the IRS and found out the necessary paperwork to allow me to represent my relative. The two possibilities were a payment schedule or an Offer in Compromise (OIC). Essentially it was filling out paperwork or a worksheet and then submitting it and calling them to discuss it.

I would call the IRS yourself and ask them about your options and go from there. I found the IRS to be very helpful and willing to work with us within their parameters. They do have some discretion.
posted by JohnnyGunn at 4:06 AM on September 19, 2023 [3 favorites]

Best answer: We simply called the IRS, explained that we simply did not have the money we owed and likely would never have that lump sum. We filled out some forms about our household expenses, sent them in with a couple months bank statements, and were put on a payment plan. We'll be paying them monthly for over a decade, but since that monthly payment is ten dollars, I'm okay with that.

Mostly they care, AFAICT, that you aren't trying to evade them.
posted by Vigilant at 4:17 AM on September 19, 2023 [9 favorites]

Try dealing with the IRS directly first. My understanding is that they are staffed with great people who will really try to help you. And that the mechanisms like payment plans that you need, are there for the asking. Don't assume this is an adversarial situation yet, don't involve a lawyer and that cost until you really need to.
posted by Dashy at 5:04 AM on September 19, 2023 [1 favorite]

Start by calling and talking through payment plan options. You are not on the run from the mafia, this happens to lots of people, they have a mechanism for it.

And a note for future scares: do not panic-pay more money than you have to/can afford to entities that can extend you basically interest-free loans. I know we as a society set up "not paying taxes" as a moral failure (at least if you have less than a million dollars, after which instead you are "smart") and you're scrambling because you are a good person who wants to be perceived as a good person, but the taxes that regular people pay are exploitative and you should not feel bad about yourself for experiencing the system exactly as designed.

You are not a criminal or a bad person. Start with the very nice people on the helpline. I mean, fuck the IRS as an overall entity, but they have amazing customer service.
posted by Lyn Never at 6:36 AM on September 19, 2023 [1 favorite]

Response by poster: "The reason I was asking is that most of the federally-backed mortgages were entitled to some form of deferral that would kick their CARES Act forbearance accruals to the end of the loan (at zero percent). I hope your servicer didn't hustle you out of that entitlement. Not directly relevant to your question, sorry, as I don't think it can be fixed now.)"

So that did not apply to me because I had PMI on my mortgage even though it's a very minimal monthly amount. Because of that I couldn't just tack the mortgage on at the end which is what I was HOPING I would have been able to do. What's another year on your mortgage if you plan to make say 1.5x the payments and catch back up etc. But instead they required that I pay back the forbearance in full at the end of the plan.
posted by PetiePal at 6:57 AM on September 19, 2023

I, too, had a very positive experience dealing directly with the IRS and I'd encourage you to try it first.
posted by probably not that Karen Blair at 11:48 AM on September 19, 2023