During the tax season, people may find that they owe more taxes than they can pay. When this happens, the Internal Revenue Service (IRS) allows taxpayers to establish payment agreements to pay their tax burden. In most cases, the taxpayer must make a deposit and pay interest on the balance. It is important to note that money due to the IRS cannot be forgiven through bankruptcy. It is considered a non-exempt item and, therefore, even if other debts can be obtained through the courts, the financial burden you have with the IRS will be permanent. Meanwhile, the debt owed to the tax agency increases as interest is earned. This means that you will owe more money and for a longer period of time. If the taxpayer makes payments pursuant to their payment agreement, there are no problems. However, if the taxpayer falls behind or stops paying, the IRS can cancel the payment agreement and put the taxpayer in default. When this occurs, the taxpayer receives a notice called CP523. The notice will inform the taxpayer about the delinquency and the actions the IRS can take to recover the taxes due. Some of the options the tax agency has to collect debt include:

• Garnishment of wages.
• Seizure of assets.
• Freezing of bank and investment accounts.

It’s pretty obvious that falling into default on a payment agreement with the IRS isn’t ideal. But there are things you can do to correct delinquencies. The IRS offers advice on getting back on track with your payment plan with notice CP523. Some of the options in notice CP523 include:

• Make the required payments to catch up.
• Contact the IRS and try to negotiate the payment plan. You may have to provide proof that the required payments are greater than what you can afford. Payment stubs, bank statements, or other documentation may be required.

The most important thing you can do is contact the IRS and speak to a consumer service representative. Ignoring the warning will make the situation worse. The notice will give you a deadline to respond, but generally you should contact the agency within 30 days of receiving the notice. If you can make a new payment plan with the IRS, it’s important not to default a second time. New delinquencies can result in fines, charges, and even a higher tax burden. It may also prevent you from qualifying for a future payment agreement. For those having financial difficulties, talking to an experienced legal professional could help you straighten out your financial situation.  

Failure to pay taxes

Failure to pay taxes or file tax returns on time can have very serious and alarming consequences. In addition, people who do not file returns or do not pay their taxes on time may receive significant financial penalties under current law. Those who make the filings or pay their taxes late may receive fines for non-payment or filing. In general terms, the fines related to non-compliance of presentation are more serious than those related to non-payment. So if you can’t pay all the taxes you owe, you should file your tax returns and pay the highest amount you can. This will allow you to avoid more severe penalties related to failure to file. The Internal Revenue Service (IRS) will help people who cannot pay their taxes and will even create a payment plan that helps them pay off their tax debts over a period of time.  

Fines for breach of presentation or payment

Fines for non-filing are usually 5% of the amount owed for taxes for each month in which the corresponding return is not filed. Fortunately, there is a maximum limit on this value and you can never exceed 25% of the total taxes owed. If filing is more than 60 days late, you must pay a minimum late payment penalty of $ 135 or the full amount of taxes due (whichever is less). Regarding fines for non-payment of taxes, the delay in payment will generally entail the payment of half of 1% of the unpaid taxes corresponding to the month due. The maximum limit for this fine is 25% of all taxes owed. Penalties for non-payment will not be applied to people who request an extension of the term and pay 90% or more of their tax obligations on or before the original payment date, provided that the remaining amount is paid before that the extended term ends. If both fines for non-payment and non-compliance are applied in a given month, the percentage of 5% for non-presentation will be reduced to the fine for non-payment corresponding to the month in question. In these cases, if you file more than 60 days late, you must pay a minimum fine of $ 135 or the full amount of taxes due (whichever is less).  

Cancellation of tax penalties

If you can show that the default of payment or tax filing had a legitimate justification, you can request the exemption of fines and penalties for late payment. Otherwise, the court will consider that the breach of the tax codes has been an intentional negligence, and you will have to pay the corresponding fees. There are many reasons why a person could default on their tax obligations. Unfortunately, in cases where a person did not make a filing for convenience or misunderstanding of the statutory provisions, the IRS will disregard these reasons for granting exemption from fines. Fines and penalties related to non-payment or filing of tax returns can quickly accumulate. Therefore, those who delay paying taxes will want to solve the problem as quickly as possible.  

Get help paying taxes due

Consulting with an experienced tax attorney can be very helpful for those who owe taxes. An attorney can help you assess your situation and determine if the final tax debt can be reduced. If a reduction in your tax obligations is determined to be lawful based on financial analysis, this will also allow you to reduce any percentage late payment penalty.