After the initial fear subsides, a letter from the IRS usually puts one question in your mind: how long will it take to resolve this tax issue? Nobody wants to deal with the IRS, but by organizing your paperwork and responding in a timely fashion, you’ll see that most cases can be closed fairly quickly. And those that can’t usually need little more than additional information.
HOW LONG DOES IT TAKE TO TYPICALLY RESOLVE A TAX ISSUE?
Unfortunately, we can’t provide just one answer because each situation poses its own timeline. Let’s start with a levy, which is one of the most serious tactics the IRS will employ to collect monies owed. This refers to a legal seizure of any property you own or have an interest in, including wages, bank accounts, a home, and your car. Once the levy is in place, it’s important you act quickly.
Time Required to Lift a Levy
The IRS will immediately release a levy once you’ve made satisfactory payment arrangements, which can be done over the phone. At the end of your conversation, ask the representative for a faxed copy of the release rather than waiting weeks or months for that document to arrive in the mail. You can then present the release to your employer or payer to immediately stop a wage levy (garnishment).
If your savings and/or checking accounts have been levied, the bank must hold the funds for 21 days before remitting them to the IRS. This gives you time to enter into a payment arrangement and get your money redeposited. Again, remember to ask for a faxed copy of the release to provide to your banker.
DEALING WITH A LIEN
Notably different from a levy, a lien is the government’s way of enacting a legal claim against your property. The IRS files a public notice, and the lien becomes attached to your assets. While this act can negatively impact your credit, the good news is you can remove it in a few different ways. The first, and easiest, method is by paying your tax in debt in full. Once the IRS receives that payment, the lien will be removed within 30 days.
Additional Lien Remedies
If you cannot pay the balance owed, you can make payment arrangements and ask for a different remedy. A discharge, for example, removes the lien from a specific property and can be helpful if you need to sell or refinance.
A subordination keeps the lien in place but allows other creditors precedence over the IRS. This makes it slightly easier to obtain a loan or mortgage. A withdrawal removes the public notice so the IRS no longer has a claim against your assets; you are, however, still responsible for paying the balance due. Certain eligibility requirements must be met with each of these scenarios.
When you are unable to pay your tax debt in full, an installment agreement can often be arranged whereby you make monthly payments. The time required to arrange this depends on whether you use the IRS’ online payment agreement tool or call to speak with a representative. The former takes 15 to 20 minutes, whereas the latter involves wait times and may take an hour or more.
For Balances Over $50,000
If you owe between $50,000 and $100,000 in tax debt, a little more time will be required for your payment arrangement because the IRS will need to verify financial information. You’ll also need to choose which method will be used to make your payments: direct debit, payroll deduction, or a checking account. Finalizing your payment method can take between one and two months after it’s been provided by phone to an IRS agent.
For balances of more than $100,000, additional time will be necessary to work with the IRS. You’ll need to request the paperwork by phone, wait for it to arrive, and then complete and return it for review. This process can take several months or more, especially if the IRS needs additional information. Be patient, however, and provide all documents as requested. The faster you comply with the requests, the faster you can resolve your tax issue.
Offer in Compromise
If the IRS believes you cannot pay your balance in full, an Offer in Compromise (OIC) allows you to settle the debt for less than you owe. An OIC is simply a way for the IRS to collect at least some money from you and is based on such factors as:
- The total balance due
- The amount of time left to collect the tax bill based on the 10-year statute
- The liquidation value of your assets
- What you can reasonably afford to pay now and in the future
For tax bills of less than $50,000, it can take four to six months for the OIC to be completed. When the amount owed is greater than $50,000, the OIC will be completed in seven to 12 months. The IRS uses this time to decide whether to accept or reject your offer.
TIMEFRAME FOR AN AUDIT
The IRS essentially conducts three different types of audits that each has its own timeframe. Mail audits usually move the fastest and can be completed in three to six months. You’ll receive notification of the audit by mail, usually within seven months of filing your return, and must respond before the deadline provided.
Office audits, conducted in a local IRS office, move just as quickly as their mail counterparts. You’ll receive a letter in the mail that details your case and an IRS agent will meet with you and/or your tax preparer to review specific information. Office audits are generally wrapped in three to six months.
Field audits take the longest to complete and can last a year or more, depending on the complexity of your return. These often involve small businesses and multiple tax years in addition to a thorough review of your finances and records.
In some circumstances, you can qualify for relief from penalties to help reduce your tax obligation. You must show you tried to comply with the law but were unable to because of circumstances outside your control. Penalties that may be abated include those for failing to file your return and/or pay your debt on time.
If you have reasonable cause for filing or paying late, you can call the IRS and potentially receive an immediate decision. Sometimes more information is required, while in other cases, you’ll be instructed to request abatement in writing. The IRS usually responds to written requests within three to four months.
If you have complied with all IRS regulations for the past three years, you may be eligible for a first-time abatement. You’ll receive an instant decision by calling and, if approved, the IRS will then send you a letter indicating the penalties on your account have been removed. If you ask for first-time abatement by letter, the decision process takes between two and three months.
The time required to resolve a tax issue can vary significantly depending on your unique situation. If you’ve received a letter from the IRS and aren’t sure how to proceed, we’re here to help. Even the most dire of circumstances can be addressed, especially with a team of caring, knowledgeable professionals at your side. Start settling your tax debt today by calling Geaux Tax Resolution.