I was recently asked whether you should send your tax payments to the IRS by certified mail.
It is my rule of thumb that everything you send to the IRS should be sent via Certified Mail Return Receipt Requested. Why? Because you want to be able to prove that you sent what you say you sent and prove that the IRS has received it.
Let’s think about it for a second. The IRS is made up of hundreds of offices all over the country with thousands and thousands of employees. There are millions of letters sent to the IRS each year. Do you think they ever lose a piece of mail? From experience, trust me, the answer is YES!
Especially when you are sending payments to the IRS you want to make sure that they have received your money. But this is also extremely important if you are filing your income tax returns by mail because of the impact penalties and interest can have on the amount you will owe if the IRS believes that your income tax returns were filed late or not filed at all.
I have also been able to have appeals cases reopened after the IRS closed them because they said they never received anything, but I was able to produce the documents I sent along with proof of mailing and proof of receipt by the IRS. This has saved clients lots of money and time over the years.
If you haven’t filed your income tax returns yet, this is a warning to remind you that you have until next Tuesday, April 15, 2008 at midnight to get your tax returns filed. Here are a few tips to keep in mind if you are a tax procrastinator:
- Check with your local post office to see if they will have extended hours on Tuesday night. Some post offices will remain open until midnight so you can make sure you get your tax returns post marked by that time.
- If you do wait until the last day, make sure you get them postmarked while it is still April 15, and be sure to send the tax returns via certified mail, return receipt requested.
- Go ahead and file your tax return no matter if you owe the IRS money and you don’t have any money to pay it. We’ve discussed this on here before. You will save yourself up to a 25% penalty by at least filing the return.
- If you owe money and cannot afford to pay it, look into your options. Depending on the amount you owe and your past history with the IRS you may be able to easily set up an installment agreement. If you owe a significant amount you may be eligible for an offer in compromise. Read more on this blog to learn more about those options or contact a tax professional to assist you and your specific situation.
Question: I currently have a an installment payment plan for my 2005 taxes and have paid most of it off. I’ve just filed my taxes and the amount owed is more than expected. If I were to pay the balance for my ‘05 taxes, would I be able to set up a new installment plan for my 07 taxes?
Answer: Thanks so much for your question. When you file your 2007 income tax return with a balance due, the IRS system will automatically default your current installment agreement since one of your “agreements” when you set up the installment agreement was to remain current with all of your tax filings and payments.
Depending on the amount you will owe for 2007 it may or may not be a difficult chore to get your installment agreement reinstated. If you have the money to pay off your 2005 liability, I would recommend paying that liability off in full. Who wants to owe the IRS money and pay that crazy interest rate anyway? Then, you should send in an installment agreement request with your 2007 federal income tax return. If you have already filed your tax return you can wait until the IRS sends you a notice, or you can go ahead an call the collections department and tell them you want to set up an installment agreement. The earlier you can set up a payment plan, the better you will be in the long run because it will reduce the total amount of interest that you will pay. Even if you do not have a formal agreement set up you can begin making “voluntary” payments now to reduce the total amount of the liability and the interest. If you owe less than $10,000 overall, it will not be a big deal for the IRS to set up your installment agreement. When you owe less than $25,000 the IRS does not require that you prepare a financial statement (discussed below).
If you total due is over $25,000 then the IRS will require you to fill out a financial form, 433-A, and the difference between your monthly income and allowable expenses will determine your payment amount and if there are assets with significant equity, the IRS will require that you attempt to borrow against that equity or liquidate assets to pay them off.
Bottom line: The IRS will set up a payment plan for you for your new 2007 tax liability. How much you have to pay them each month will depend on the factors set out above.
Finally, as a disclaimer, I need to do my ethical duty as an attorney and let you know that this blog is meant to provide general tax and legal information and not specific information for your particular situation. You should always consult a competent attorney or tax professional to discuss the specifics of your case.
Hello Everyone. I just wanted to let you know that if you have tried to contact me via the “contact us form” recently, I have not received your e-mail. There was a glitch on my end with the program set-up and none of the e-mails were being received. I fixed the problem this morning, so if you still have a question, please do not hesitate to send the e-mail again. Thanks and I’m sorry for the mess up!