What to Do When You Owe the IRS and Can't Pay in Burbank, CA

What to Do When You Owe the IRS and Can't Pay in Burbank, CA

Tax season can bring anxious moments, especially if you find yourself in a position where you owe the IRS but can't afford to pay. Feeling overwhelmed is common, but understanding your options is crucial for mitigating stress and avoiding severe consequences. If you’re living in Burbank, California, or nearby areas like Toluca Lake, Glendale, or Studio City, and are seeking guidance, this article will provide you with essential information and actionable steps.

Understanding IRS Tax Debt

When you owe money to the IRS, it's important to address the situation promptly to avoid complications such as penalties and interest. The IRS offers various options for those who find themselves unable to pay their tax bill in full. Here’s what you need to know:

1. Total Amount Owed: Before taking any next steps, assess the total amount you owe. Include not only the tax liability but also any additional penalties and interest that may apply.
2. Deadline Awareness: Be mindful of deadlines. The IRS typically expects payment within a specific timeframe; defaulting can lead to more serious consequences.

Options for Managing Your IRS Debt

If you're struggling to pay your IRS bill, here are some options available to you:

1. Installment Agreement

An Installment Agreement allows you to make manageable monthly payments to the IRS over time. Here’s how to set this up:

• Determine Eligibility: Generally, you must owe less than $50,000 in tax, penalties, and interest. If your debt is more than this, you may need to request a different payment plan.
• Apply Online: You can apply for an installment agreement online through the IRS website. You'll need to complete Form 9465 if you prefer to submit your request via mail.
• Agree on Monthly Payments: Be realistic about what you can afford to pay. The IRS will generally take your financial situation into account when determining monthly payment amounts.

2. Offer in Compromise (OIC)

If paying your tax bill would create significant financial hardship, you might qualify for an Offer in Compromise (OIC), which lets you settle your tax debt for less than the full amount owed.
To qualify:

• Submit Form 656: You’ll need to fill out this form along with your OIC application.
• Provide Financial Disclosure: Be prepared to provide detailed information regarding your income, expenses, and assets. This helps the IRS assess whether accepting your offer is in their best interest.

3. Currently Not Collectible (CNC) Status

If you can prove that paying any amount would create undue hardships, you may qualify for Currently Not Collectible (CNC) status.

• Contact the IRS: You must initiate this obviously, providing documentation proving your financial hardship.
• Note the Implications: Being in CNC status temporarily halts collection actions and allows you peace of mind, but it does not erase your tax debt.

Local California Considerations

Living in Burbank or the surrounding areas means you also have to consider California state taxes. California has its own tax obligations and forms, such as the Franchise Tax Board (FTB), CA Form 540, and CA payroll tax DE-9.

• Contacting the FTB: Should you owe California state taxes, reach out to the FTB for payment plans or arrangements similar to the IRS options.
• Understand State Laws: California tax laws may differ from federal regulations, affecting how you approach your payments.

4. Seek Professional Help

It's often beneficial to consult a tax professional, especially if your case is complicated or you’re unsure what the best option is for your situation.

• Calculus Tax’s Expertise: Our Burbank-based accounting firm specializes in tax debt solutions tailored to the unique challenges faced by clients in Los Angeles County.

Important IRS Forms and Publications

When dealing with tax debt, knowing the right IRS forms and publications is crucial:

• Form 9465 (Installment Agreement Request)
• Form 656 (Offer in Compromise)
• Publication 594 (The IRS Collection Process)
• Publication 971 (Instalment Agreement Request)
• Publication 556 (Examination of Returns, Appeal Rights, and Claims for Refund)

Conclusion

Navigating the IRS when you owe money and cannot pay can be daunting. However, by understanding your options—like installment agreements, OICs, and CNC status—you can take steps to manage your tax debt responsibly. Our knowledgeable team at Calculus Tax is here to help residents of Burbank and the surrounding areas find the best solutions tailored to their individual circumstances.

Don't wait for penalties to pile up—take action today. We are committed to guiding you through the complex world of tax debt relief.

FAQ

What happens if I ignore my IRS debt?

Ignoring your IRS debt can lead to severe consequences, including penalties, interest charges, and even tax liens or levies on your property. It’s essential to address the issue as soon as possible to avoid these repercussions.

Can I negotiate my tax bill with the IRS?

Yes, the IRS allows for debt negotiation through options such as an Offer in Compromise (OIC), where you can settle for less than what you owe under certain circumstances.

How do I apply for an installment agreement?

You can apply for an Installment Agreement through the IRS website or by submitting Form 9465. Ensure you gather all necessary information regarding your tax owed and current financial situation.

How long will it take to settle my tax debt?

The timeline for settling tax debt varies depending on your choices and IRS processes. An installment agreement could take several months to set up, while an OIC may take longer due to the review process.

What income level qualifies for the Currently Not Collectible status?

There is no fixed income level for CNC status; it depends on your overall financial situation, including income, expenses, and dependents.

Tags

• tax debt
• burbank
• irs
• tax payment
• tax planning
• los angeles
• financial advice

Read Time

5-7 minutes