The return is filed. The balance due is bigger than anyone expected. Now what?
I know this moment well, and chances are your client is feeling it too. Maybe cash is tight. Maybe necessary business expenses ate up the money set aside for taxes. Maybe withholding and estimated payments just didn’t keep up with income.
Whatever the reason, here’s the most important thing to tell them: don’t wait for an IRS notice to start dealing with it.
The weeks right after filing are a great time to confirm what’s owed, look at payment options, and see whether any penalty relief applies. One thing to be clear about, though: there is no special grace period after filing. The payment deadline, and any deadline printed on an IRS notice, is what counts.
Here are three steps worth taking.
1. Pay what your client can, even if it isn’t everything
It’s tempting to wait until they can pay the whole thing at once. But waiting usually costs more.
For most calendar year individual returns, payment is due April 15. Weekends, holidays, disaster relief, and a few other rules can move that date. Interest generally starts on the unpaid tax from that original due date, and a failure-to-pay penalty can apply too. An extension gives your client more time to file. It doesn’t give them more time to pay.
So filing doesn’t start the payment clock, and it doesn’t restart it either. A client who files in October on extension still owed the tax in April.
A few practical things to do:
Make a partial payment. Lowering the unpaid tax lowers the balance that interest and penalties are assessed on.
Look at the cash on hand. Figure out what they can truly pay after essential living expenses, necessary business expenses, and current tax obligations.
Don’t sit and wait for the bill. There’s no reason to wait to pay or explore options until the IRS sends a notice.
A partial payment won’t wipe out the debt, but it can keep the extra charges from piling up.
2. Look into an IRS payment arrangement
If your client can’t pay in full, a payment arrangement may be the path forward. The IRS offers short-term payment plans and longer-term installment agreements. Eligibility depends on the balance, filing compliance, ability to pay, and the IRS’s current requirements.
Before going down that road, take a look at:
The full balance. Count other years, penalties and interest, not just what’s on the latest return.
A payment they can really afford. Build it around realistic cash flow.
Filing compliance. Make sure every required return is filed.
Current year obligations. They’ll need adequate withholding or estimated payments while they work down the old balance.
The total cost. Think about setup fees, ongoing interest, and penalties.
An installment agreement doesn’t reduce the tax itself, and penalties and interest keep running. There is some good news, though. For an individual who filed on time (extensions count), the failure-to-pay penalty generally drops from 0.5% to 0.25% per month while the agreement is in place. Interest still continues.
Your client also generally doesn’t have to wait for a collection notice to ask for an arrangement. (See the Instructions for Form 9465.)
If even a payment plan would cause real financial hardship, consider a temporary collection delay, a request for currently not-collectible, or an offer in compromise. Each has its own eligibility rules, so they aren’t automatic backups for a payment plan.
3. Don’t forget about penalty relief
When everyone focuses on paying the balance, penalty relief often gets overlooked. There are two main routes.
First Time Abatement is administrative relief for certain penalties, depending on your client’s compliance history and filing and payment requirements.
Reasonable cause is a different analysis. For failure to pay, the question is whether your client used ordinary business care and prudence and still couldn’t pay, or would have faced undue hardship by paying on time. Not having the cash, all by itself, isn’t enough.
Before going after relief, review:
Their filing, payment, and penalty history
The specific penalty involved
What caused the missed deadline
The timeline of those events
Their records and their efforts to comply
Please don’t promise an abatement before that review is done.
It’s also worth keeping penalties and interest separate in your mind, and in your client’s. Removing a penalty generally doesn’t remove the interest on the underlying tax. Interest on an abated penalty is generally adjusted, but relief from interest itself is limited.
Why early action matters, and why there’s no 30-to-60-day cushion
There’s no universal 30- or 60-day window for taking care of a balance after you file, and it’s not a reason to put things off. Use the time right after filing to:
Confirm the balance and the payment deadline
Figure out what can be paid now
Look at payment or hardship options
Review possible penalty relief
Fix withholding or estimates so this doesn’t happen again
Land on a documented next step
And if an IRS notice does show up, read it right away and respond by the stated deadline. If something looks wrong, look into it instead of ignoring it.
Acting early doesn’t guarantee approval of a payment plan or penalty relief. It does, however, help your client understand their options, avoid unnecessary charges, and keep the balance from sitting unaddressed.
When Should You Bring in a Tax Resolution Specialist?
You already do so much for your clients. You keep them compliant, help them understand what they owe, and guide them through some big financial decisions. But every so often, a tax debt situation needs more time, specialized knowledge, or hands-on resolution work than your practice can handle. That’s completely normal, and it’s not a reflection on you; understandably, you can’t be an expert in every area of tax.
That’s where we come in.
At Golden Lion Tax Solutions, we work alongside tax professionals. We review the tax debt, discuss possible resolution options, and help your client work toward the right outcome for their situation.
And you don’t have to hand your client off to do it. You can bring in a specialist and still be the trusted advisor who knows their bigger financial and tax picture.
Let’s Talk About Your Client’s Tax Debt
If your client filed and now owes more than they can comfortably pay, let’s talk it through before it gets harder to manage.
Book a consultation at https://gltsprofessionalcollaborations.youcanbook.me.
No pressure and no obligation. It’s just a chance to look at the situation together and see what a path forward might look like.
Golden Lion Tax Solutions: There is ALWAYS a solution!