You receive an IRS CP90 Notice when you don’t pay your federal taxes by the due date. This is the final warning from the IRS to solve your tax problems before they start to levy your assets, including your property, paychecks, bank accounts, or state tax refunds. Once you get this notice, you have 30 days to pay or appeal.
Unique Circumstances With An IRS CP90 Notice
While most people receive an IRS CP90 Notice because they didn’t pay their taxes, sometimes unusual circumstances can trigger one as well.
Identity Theft
Theft of personally identifying information is on the rise. Unfortunately, it is all too common for a thief to file a tax return under your name and social security number to steal the refund that you are entitled to. When you file your tax return, the taxes you paid in (through withholding or estimated payments) are gone, and now the IRS thinks that you owe taxes, even though you don’t.
Deceased Family Members
Another circumstance involves a family member who recently passed and owed money to the IRS. The IRS may not be aware of the death and send a CP90 Notice to their existing relatives to try to collect the tax.
How To Protect Yourself From Your Assets Being Seized
It can be scary to receive an IRS CP90 Notice, but there are options. You can pay your tax balances in full or file an appeal by requesting a Collection Due Process hearing (called a “CDP hearing”). The appeal must be mailed to the IRS within 30 days from the date on the CP90 Notice. If you timely file an appeal, you will protect your income and assets from being seized and give yourself time to consider whether one of the following options will work for you. Consult a tax attorney first, they can help you decide the best way to proceed.
Pay In Full
There is no cookie-cutter answer, but the easiest way to solve the problem is to pay in full. There are a couple of things to consider if you’re thinking about paying off the balances in one lump-sum payment. First, determine what portion of the tax balance is tax, penalty and interest. If you have the means to pay the unpaid tax, it may be best to do that first so the penalties will stop accruing. You can pay the remainder over time through an installment agreement (discussed below).
Second, the IRS generally has 10 years to collect back taxes. If you think it has been close to 10 years since you filed the tax returns, you should consult a tax attorney before you pay the taxes in full.
If you cannot pay your tax balances in one lump-sum payment, read the following options.
Installment Agreement
You can pay the tax balance on the IRS CP90 through an Installment Agreement, which is a monthly payment plan. If you’re an individual who owes less than $50,000, you can set up a payment plan on the IRS website.
There’s no minimum payment amount, but the IRS generally requires you to pay the balance within 5 years (prorated over 60 months). However, if you can’t make the payments due to Covid or something else, a tax lawyer can help you find a workaround.
If you’re a business owner and have unpaid payroll taxes, it’s much more complicated so an Installment Agreement may not work for you. Consult a tax lawyer to discuss the best way to handle back payroll taxes.
Offer In Compromise
You can make an offer to settle your back taxes by submitting an Offer in Compromise to the IRS. While it might seem easy to negotiate a settlement yourself, it’s not recommended. The IRS uses a specific set of rules and standards to analyze income, expenses and assets. It might seem easy to organize all of this information, but it’s actually quite complicated.
Plus, you’ll most likely have to deal with some unreasonable IRS employees, as well as employees who don’t know what they are doing because they were not trained well. Working with a legal expert will help you navigate these stressful waters and present your offer in the best light possible.
Currently Not Collectible Status
When facing an IRS CP90 Notice, “currently not collectible status” means the IRS has concluded you cannot afford to pay your debt at the moment. This lasts for 1-2 years depending on your income. Again, the IRS will analyze your income, expenses and assets to figure out whether you have the ability to make payments toward your back taxes. .
Need Help With Your IRS CP90 Notice?
There are so many factors to take into account when dealing with an IRS CP90 Notice. If you respond incorrectly, you can unintentionally make the situation worse. The best approach is to work with a tax lawyer to walk you through the best actions to take.
If you’re overwhelmed, contact Mindy Meigs expert tax attorney today for help with your IRS CP90.