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Part I - Owing the IRS Money

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Today is March 31, 2014. Tax day is just 16 days away. I been in business for 20 years, and if you’ve waited this long to do your tax return, you probably have horrible records, or you owe the IRS money. This is the first part of a four-part series on owing the IRS money.

There are two people’s pockets that you don’t want to be in. The IRS, and the Mafia. If you’re in the pocket of the Mafia, and you don’t pay, you could take a ride Out to the desert. If you’re in the IRS’s pocket and you don’t pay, you can lose everything that you have. That is just a simple fact of life.

First of all, you’re the Internal Revenue Service money, and you don’t pay, nobody’s is going to put you in jail. Not paying your taxes is not a criminal offense. At some point, the IRS will put a lien against you if you fail to make an effort to pay your tax bill, which means they can take everything you have, but you won’t do any time in Leavenworth Federal Prison.

This week, I would like to give you a broad overview of what happens when you owe the Internal Revenue Service money. Next week, we will talk about Installment Agreements, the following week, we will talk about IRS Tax Liens, and finally, we will finish with Offers in Compromise.

It is April 14th, and you decide to sit down and do your tax return. After you complete the return, you realize that you owe $5000. The first thing that you do is think that you can file an extension. Most people believe that filing an extension will allow you to pay your taxes late. This is untrue. Filing an extension, is only an extension of time to file, it is NOT an extension of time to pay. Your taxes are due on April 15th, regardless of if you file for an extension. Form 4868, has a place for you to calculate and pay an estimated amount of taxes that you owe. If you owe money, and file an extension, and do not pay the tax by April 15th. Then you have to start paying penalties and interest. The penalties and interest are not cheap. The penalty for filing your taxes late is 5% of the tax due, up to five months. If your return is over 60 days late. The minimum penalty $135 or 100% of the tax that is owed. The interest is a different story, it is calculated at the applicable Federal Rate plus 3%. As you can see it is not cheap.

If you just ignore the IRS’s request for payment of your taxes, eventually they will file a tax lien against you. To circumvent a tax lien, you can ask to pay your taxes and installments by asking for an Installment Agreement. There’s a $53 fee for asking the pay your taxes in installments. In addition, interest keeps accruing until the taxes are paid off. If you just flat don’t have the money, don’t have the assets, and nothing for the IRS to seize you can offer the IRS an amount that is less than the taxes owed, and they could compromise the debt. We will talk further about these programs in the upcoming weeks.

The last thing you want to do is owe the IRS money.

Craig Smalley is the managing partner of CWSEAPA®, LLP, which is an accounting and financial firm located in Delaware, Florida, and Nevada. Craig has been Admitted to Practice Before the Internal Revenue Service, is a Certified Estate Planner™, and is a Certified Tax Resolution Specialist™. Craig specializes in taxation and IRS representation all the way through the United States Tax Court. Form more information visit, call 1-844-CWSEAPA, or email him at

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