?? A Counterintuitive Approach to IRS Debt: Why Less Isn't Always More!

?? Introduction: In the nuanced world of tax resolution, the general aim is to pay as little to the IRS as possible. However, a recent case of mine where my client suffered from a brief, industry-wide strike highlighted a counterintuitive strategy where paying more up front would actually be more advantageous in the long run.

??? Pay Attention to the Details: Understanding tax debt resolution strategy and how to make decisions when your client has tax debt is crucial for accountants. It can significantly affect a client's financial health and stress management. Here, the choice between Currently Non Collectible (CNC) status and an Installment Agreement prompts an interesting discussion.

?? Points of Discussion: Case in Point

• Client's Financial Challenge: My client’s income dramatically decreased from $100k to under $40k because of an industry strike. She wanted me to negotiate CNC status for relief from having to make IRS payments.
• IRS Demands and Practical Challenges: We set to negotiate the status she wanted but before long, things became complicated. The IRS demanded proof of her income drop and substantiation for the change in circumstances. The effort to provide this extensive documentation was time-consuming but also stressful for the client.

What about a Streamline Installment Agreement (SIA)?:

• Resolution and Protection: Opting for an SIA meant agreeing to a higher monthly payment, but it offered immediate resolution and protection from IRS collections.
• Long-Term Stability: A SIA provided a consistent and long-term plan, unlike CNC status, which would be temporary and subject to change with fluctuating income.
• Long-Term Financial Implications: If we negotiated CNC, she would face renegotiation once her income normalized, leading to higher payments due to accrued debt and less time left on the Statute of Limitations, i.e., the amount of time the IRS had to collect the tax debt from her. Plus, she’d have to either fight with the IRS on her own or pay me more to negotiate a new resolution.

Benefits of an SIA Instead of a CNC:

An SIA Avoided a Renegotiation: The SIA eliminated the need for renegotiating a new payment plan with her changing income level. My client’s income would have likely gone back to normal by next year and she’d have to renegotiate a resolution to protect herself shortly.

Financial Predictability: The SIA provided a more predictable financial plan, allowing my client the ability to budget better for personal and business purposes without having to worry about the unknown of another go around with the IRS.

?? TL;DR (Too Long; Didn't Read):

My client was dealing with a significant but temporarily lower personal income because of a strike within her industry. Opting for a Streamline Installment Agreement rather than seeking Currently Not Collectible Status offered my client better long-term benefits despite the short-term gains of a CNC. The SIA ensured debt resolution, protection from collections, and financial predictability, avoiding the money and stress of renegotiations and increasing monthly payments over time.

?? Accountants: This case was a perfect example where a deep dive into the details of a client's tax debt and the circumstances surrounding it was important in order to guide them to the most financially sound IRS resolution strategy.

Short-term gains are not the ultimate goal with tax debt. It's not about paying less now; it's about creating stability and peace of mind for your clients in the long run. Your client's will appreciate you for it.

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