According to the IRS, nearly 3 in 10 taxpayers either owed taxes or broke even this year (IRS Filing Season Stats). That means many of your clients are walking away from this filing season with a balance due. As a tax professional, it’s crucial to equip them with realistic options, and avoidable pitfalls, when it comes to unpaid tax balances.
While we always hope our clients can pay their balance in full by the deadline, we know that’s not always the case. When a taxpayer fails to pay on time, the IRS begins assessing penalties, typically 0.5% of the unpaid taxes per month, up to 25%. That doesn’t include accruing interest, which continues to grow until the debt is resolved.
Let’s break down how you, as the preparer, can help your clients navigate this situation while keeping compliance and long-term financial wellness in mind.
Extensions Don’t Extend Payment Deadlines
First, make sure your clients understand a critical point: a filing extension is not a payment extension.
This misconception can cost taxpayers big. While Form 4868 gives them six extra months to file, the tax payment is still due by the original deadline (usually April 15). Any unpaid balance begins accruing failure-to-pay penalties and interest immediately, regardless of the extension.
Make it a point during tax season to remind clients of this. It’s one of those seemingly small details that can prevent a mountain of future issues, and a bunch of calls to your office once they get a letter in the mail.
Form 9465: Not Just a Checkbox
For clients who can’t pay in full, you may have considered filing Form 9465: Installment Agreement Request. Many preparers attach this form to the back of the return for clients who are unable to pay in full.
While this is well-intentioned, these requests often get rejected. Why? Because they fail to account for all existing tax periods. Be honest, this probably isn’t the first time your client has carried an unpaid balance. If the installment agreement doesn’t reflect all outstanding tax debts, the IRS won’t approve it.
A successful payment plan application begins with having the full picture.
Know Your CSEDs: Why They Matter
One of the most overlooked elements in setting up an IRS payment plan is the Collection Statute Expiration Date (CSED). This is the date the IRS can no longer legally collect a tax debt, usually 10 years from the date the tax was assessed.
When calculating an appropriate monthly payment, it’s important to ensure the balance will be paid before the CSED expires. Otherwise, the IRS may reject the plan or request a higher monthly payment to satisfy the debt in time.
Before submitting a payment plan request, gather the client’s CSEDs for each tax year. If you’re unsure how to access this, consider working with a firm that specializes in tax resolution, they’ll know how to quickly retrieve and interpret these critical details.
IRS Phone Support: Manage Expectations
Here’s the truth: getting an IRS agent on the phone is a challenge, especially during tax season.
If you must call, your best bet is to:
- Call early in the morning
- Avoid Mondays and Fridays
- Steer clear of deadlines and filing week
Even then, long hold times are the norm. As a busy tax professional, sitting on hold or playing phone tag with the IRS for hours probably isn’t your best use of time.
Build a Partnership That Supports Your Clients
Instead of navigating these waters alone, consider partnering with a reputable tax controversy firm. These firms specialize in resolving IRS issues like unpaid balances, installment agreements, Offers in Compromises, and more.
But be selective, not all firms respect the boundary between tax resolution and tax preparation. You’ve worked hard to build your client base, and the last thing you need is a partner who competes for your clients’ prep work.
At Community Tax, we make it a point to protect your relationship with your clients. We specialize exclusively in tax resolution and leave the preparation to you. Our goal is to help you look like a hero to your client while relieving you of the post-filing headaches.
Final Word: Early Action Saves Money
The best advice you can give your clients? Pay the balance in full if they can.
But if full payment isn’t possible, entering into a payment plan right away is the next best option. Quick action reduces the risk of:
- Compounding penalties and interest
- IRS collection activity (like liens or levies)
- Cases being sent to private collection agencies, which comes with added stress and cost.
You’re already doing the hard work of helping clients file accurate returns. Go the extra step by educating them on what happens after April 15 because that’s when many tax problems begin.
According to the IRS, nearly 3 in 10 taxpayers either owed taxes or broke even this year (IRS Filing Season Stats). That means many of your clients are walking away from this filing season with a balance due. As a tax professional, it’s crucial to equip them with realistic options, and avoidable pitfalls, when it comes to unpaid tax balances.
While we always hope our clients can pay their balance in full by the deadline, we know that’s not always the case. When a taxpayer fails to pay on time, the IRS begins assessing penalties, typically 0.5% of the unpaid taxes per month, up to 25%. That doesn’t include accruing interest, which continues to grow until the debt is resolved.
Let’s break down how you, as the preparer, can help your clients navigate this situation while keeping compliance and long-term financial wellness in mind.
Extensions Don’t Extend Payment Deadlines
First, make sure your clients understand a critical point: a filing extension is not a payment extension.
This misconception can cost taxpayers big. While Form 4868 gives them six extra months to file, the tax payment is still due by the original deadline (usually April 15). Any unpaid balance begins accruing failure-to-pay penalties and interest immediately, regardless of the extension.
Make it a point during tax season to remind clients of this. It’s one of those seemingly small details that can prevent a mountain of future issues, and a bunch of calls to your office once they get a letter in the mail.
Form 9465: Not Just a Checkbox
For clients who can’t pay in full, you may have considered filing Form 9465: Installment Agreement Request. Many preparers attach this form to the back of the return for clients who are unable to pay in full.
While this is well-intentioned, these requests often get rejected. Why? Because they fail to account for all existing tax periods. Be honest, this probably isn’t the first time your client has carried an unpaid balance. If the installment agreement doesn’t reflect all outstanding tax debts, the IRS won’t approve it.
A successful payment plan application begins with having the full picture.
Know Your CSEDs: Why They Matter
One of the most overlooked elements in setting up an IRS payment plan is the Collection Statute Expiration Date (CSED). This is the date the IRS can no longer legally collect a tax debt, usually 10 years from the date the tax was assessed.
When calculating an appropriate monthly payment, it’s important to ensure the balance will be paid before the CSED expires. Otherwise, the IRS may reject the plan or request a higher monthly payment to satisfy the debt in time.
Before submitting a payment plan request, gather the client’s CSEDs for each tax year. If you’re unsure how to access this, consider working with a firm that specializes in tax resolution, they’ll know how to quickly retrieve and interpret these critical details.
IRS Phone Support: Manage Expectations
Here’s the truth: getting an IRS agent on the phone is a challenge, especially during tax season.
If you must call, your best bet is to:
- Call early in the morning
- Avoid Mondays and Fridays
- Steer clear of deadlines and filing week
Even then, long hold times are the norm. As a busy tax professional, sitting on hold or playing phone tag with the IRS for hours probably isn’t your best use of time.
Build a Partnership That Supports Your Clients
Instead of navigating these waters alone, consider partnering with a reputable tax controversy firm. These firms specialize in resolving IRS issues like unpaid balances, installment agreements, Offers in Compromises, and more.
But be selective, not all firms respect the boundary between tax resolution and tax preparation. You’ve worked hard to build your client base, and the last thing you need is a partner who competes for your clients’ prep work.
At Community Tax, we make it a point to protect your relationship with your clients. We specialize exclusively in tax resolution and leave the preparation to you. Our goal is to help you look like a hero to your client while relieving you of the post-filing headaches.
Final Word: Early Action Saves Money
The best advice you can give your clients? Pay the balance in full if they can.
But if full payment isn’t possible, entering into a payment plan right away is the next best option. Quick action reduces the risk of:
- Compounding penalties and interest
- IRS collection activity (like liens or levies)
- Cases being sent to private collection agencies, which comes with added stress and cost.
You’re already doing the hard work of helping clients file accurate returns. Go the extra step by educating them on what happens after April 15 because that’s when many tax problems begin.
