If you have received IRS Notice CP44, it means that the IRS is delaying your federal tax refund until it determines whether or not you owe other taxes. If it concludes that you do, the refund will be applied to this outstanding tax balance.
How you should respond will depend on the outcome of the IRS investigation. If you don’t owe taxes, you don’t have to do anything. You will receive your refund, along with any applicable interest, within six to eight weeks.
If the IRS decides that a tax liability exists and applies your refund to the balance, your next steps will depend on whether or not you agree that you owe the tax debt. If you don’t, an experienced tax attorney can advise you on your next steps, which could include amending a previously-submitted return. If you do, and you owe a balance you can’t afford to repay even after your refund has been applied, you may be able to reach a payment arrangement with the IRS.
Request A Payment Arrangement
When you owe a tax debt, it is critical to address it as soon as possible, to prevent penalties and interest from accruing. If you believe that you can pay it in full but need a little more time past the due date in the letter, call the IRS and request an extension. If you are not in the position to pay the full amount, the following options may be available to you.
IRS Payment Plan
An IRS payment plan, also known as an installment agreement, lets you repay your tax debt over time. To qualify, you must have:
- Filed all of your returns
- Had sufficient withholding from your wages (if employed)
- Been making estimated tax payments four times a year (if self-employed)
You will also have to pay a fee that ranges from $43 to $225, depending on how much you make and what payment arrangement you propose. Your options are:
- Guaranteed Installment Agreement. If you owe no more than $10,000 in personal (not business) taxes, you can apply for a guaranteed installment agreement, provided that the plan repays the debt within three years.
- Streamlined Agreement: Individuals who owe $50,000 or less can apply for a streamlined agreement. You must be able to pay what you owe within 72 months or before the collection statute of limitation expires, whichever is sooner.
- In-business Trust Fund Express Installment Agreement: You can apply for this installment agreement if your company owes no more than $25,000 in business taxes and you are in a position to pay it within 24 months. If your business tax debt is higher, you will have to make a lump sum payment to lower the balance to $25,000.
- Negotiated IRS Installment Agreements: If you owe over $100,000 or cannot pay within the time frame required for other agreements, you’ll need to negotiate with the IRS. You will be asked to submit financial information and provide corresponding documentation.
If you owe less than $10,000, you automatically qualify for a guaranteed installment agreement, but the other arrangements can be more complicated due to the amount of financial information required. A New Jersey tax attorney can help you qualify for the option that best resolves your tax liability.
Offer In Compromise
An offer in compromise (OIC) lets you settle your tax debt for less than the total amount owed. They are difficult to qualify for, as the IRS will only consider an OIC if:
- Your income and expenses make it unlikely that they will be able to collect the tax before the collection statute expires OR
- There is legitimate doubt that you owe the calculated amount OR
- Collecting the tax would subject you to unfair economic hardship
If you want to make an offer in compromise, you will definitely want to work with a tax attorney who understands IRS expectations and will help you present an OIC that meets their standards.
Speak with a New Jersey Tax Attorney
If a Notice CP44 leads to the discovery of a tax debt you knew nothing about, it can be distressing. At Paladini Law, Attorney Brad Paladini will work with you to find the best solution for your tax difficulties. To schedule a consultation, please call 201-381-4472 or complete our online form.
