If, when filing your tax return, you owe taxes to the Internal Revenue Service (IRS) and you do not pay them at that time, the IRS will bill you for the taxes that are due. They will send at least two notices. Additionally, if taxes are not paid after you receive a final notice, the IRS will begin to take collection actions. These actions can include applying the amount of your future tax refunds to the amount due, or seizing your property and financial assets.

If you are unable to pay your taxes, you are likely already having financial difficulties. Moreover, if you receive a notice that the IRS plans to initiate a collection action, you may worry about the possible consequences. In these cases, an experienced tax attorney can help you appeal the IRS’s decision through one of the following procedures.

Collection Due Process (CDP)

If you are unable to file your tax return by the April 15 deadline, or if you cannot pay the taxes that are due at that time, you are likely experiencing financial hardship. Unfortunately, this hardship will only be compounded by the penalties that the IRS charges for failure to file or failure to pay taxes. However, you may be eligible for relief through a first-time penalty abatement (FTA) waiver.

What is FTA?

The IRS created the FTA waiver in 2001 to encourage compliance with tax requirements. Under this program, both individuals and businesses who have been compliant in the past can receive amnesty for penalties levied against them.

If the IRS has surprised you with a significant tax bill, and if either your true liability for the tax or your ability to pay it are in question, you may be able to make an offer in compromise.

An offer in compromise is essentially what it sounds like: you make the IRS an offer to pay an amount (presumably, less than the full amount) in compromise. You agree that you will pay the agreed-upon amount instead of continuing to fight the matter, and the IRS in turn agrees to accept the amount rather than pushing for you to pay the debt in full.

When you inform the IRS of your intent to utilize the offer in compromise process, the IRS will typically halt collection activity on your account in order to provide you with the time to gather supporting documents and assemble your offer. After you turn in your offer, the IRS will evaluate it, and will either accept it, reject it outright, or make a counter-offer.