Expert: Richard Stolp - 9/10/2008

Question
QUESTION: I applied (and I used an attorney that did not really helped) for a payment plan with the IRS.  The playment plan was rejected and I may appeal. My income went down(easy to prove), some medical expenses were not taken into account.
I did have a payment plan for other tax debt with New York state and did not payed on time two times and they are going to garnish 10% from my income.  Should I mention that to the IRS during my appelation?  I had not received any document from New York yet, I learned by calling them.  Should I try to get a payment plan with the IRS and when NY notify me in writting then re-negotiate the payment plan?  How should I document my appelation?  Should I try to get a reduced payment plan?  How could I contract someone who really may help?  I want to pay but I need a payment plan that can allow me to continue supporting my family (what is hurting me is that in order to get out of so much debt I have two jobs)

Thank you

ANSWER: I would call the IRS (800-829-7650) and tell them you would like to review your payment options and your financial review.  I assume the financial review that was rejected was done by your lawyer, but you can review it yourself over the phone.  Any changes to your financial situation - like your medical expenses and your income can be changed.  The representative will tell you if any of your expenses need to be documented by mailing or faxing in a copy of them. Part of your financial review should include the 10% you are or will pay the State of NY and you will need a copy of that - either from the state or from your employer - it should show on your paycheck.

The IRS will work with you to set up a payment plan you can afford, it will just take some time on the phone.  And, you will need some follow-up documentation to show your financials to the IRS.  

Part of any payment plan with the IRS is the promise that you will not add to your balance due.  Some people get into trouble because they don't have enough withholding tax taken out at work - then on April 15th they can't pay their taxes.  Be sure you have the proper withholding for both federal and NY State at work so you don't add to your unpaid tax bill next April. And, be sure those withholding figures are part of your financial review.  Your payroll department at work can help you work the numbers if you need it.  If you add to your balance due your installment agreement will default and you will have to set up everything again.

Finally, set up your payments as a payroll deduction or direct debit from your bank.  That way its all on automatic and you don't have to worry about sending in a payment.

---------- FOLLOW-UP ----------

QUESTION: I know that I did not filled and payed on time when I was suppossed.  God know that I regret it a lot because of the pain that I am causing my family.  I am working 2 full time jobs and I will be looking for another part time because I really want to pay this and at the same time support my family.  Based upon your experience What is the most effective way to speak to the IRS representative to get to an aggreement that may work for both parties?  Do you think that I may have hope to survive this? (I owe about 60k including the penalties)  My attorney did never wanted to discuss details of the case just filling the financial statement and that was it.  How do the Tax Advocate office may help me?

Thank you again.

Answer
Because of the amount you owe it is critical that your financial review is correct and that it has all of your information - including your correct withholding.  Your payment will be based on the financial review (once your balance due goes above $25,000 you loose the ability to set your own payment amount).  Be sure your second job is taking out enough withholding.  

I'm sure you will survive this, but you are going to have to change your mind about paying your taxes.  I would call the IRS and begin that conversation.  

The Tax Advocate can only help if your case is not resolved, by the IRS, in a timely fashion or if you have some financial hardship that the IRS is not being sensitive about.