Have you ever received a Statutory Notice of Deficiency from the IRS? If you have never had the misfortune of receiving one, you might not even know what a Statutory Notice of Deficiency is. In simple terms, this document is basically a notice from the IRS that you owe them a certain amount of money in taxes and that you have a time period, usually 90 days in which to pay up. In most cases, these documents are sent in good faith by the IRS and are worded in a polite way. But ignore these notices at your peril.
Receiving a Statutory Notice of Deficiency is not the end of the world. The notice itself is not a legal document and is used only as a last resort. The IRS will give you many opportunities to pay off your debt or to set up a payment plan that is fair to you based on your current financial situation. A statutory notice of deficiency is the IRS’ official way of informing you of an impending grave situation and it is up to you to act fast before things have a chance to get worse.
Here’s an action plan for you should you receive a Statutory Notice of Deficiency. Your first action step should be to call the IRS and let them tell you what your options are. They will discuss with you how you can pay off your tax debt. It would be unlikely that you could pay it off entirely in one lump sum. So your next best option would be to suggest a mutually agreeable payment plan with the IRS. It is alright to agree on a payment plan even though you may not be able to keep to it entirely. It would at least buy you some time during which other more drastic collection methods like a bank levy or wage garnishment would be suspended.
At this point, you may be eligible for an offer of compromise. An Offer in Compromise is where you are allowed to make a part payment of your tax debt and that is received as full settlement. However, only a small percentage of people qualify for such a compromise. The IRS will likely determine exactly how much you are capable of paying over the next few months and ask for that amount. If you are eligible for an Offer in Compromise, you should accept the amount of payment required by the IRS without trying to negotiate for a bigger discount. Whatever the repayment amount set by the IRS in your Offer of Compromise is already a much reduced amount that most people would not tbe granted. The IRS wants to get as much as they can but they don’t want to ruin your life, so you would do well to go along with the offer.