The key for clients is choosing the right option , they say .

“ We ’ re seeing the largest uptick in wealthy people ’ s inability to pay their taxes since the global financial crisis ,” says Chris Mays , a partner at Armanino in El Segundo , Calif .

Steve Parrish , adjunct professor and co-director of the Center for Retirement

Income at the American College of Financial Services in King of Prussia , Pa ., says there are many reasons wealthy people rack up large tax bills . “ Tax liabilities arise because of failed attempts to shelter assets , buying into abusive tax shelters , incurring accuracy-related penalties , surtaxes like the 25 % penalty for failing to take a required minimum distribution and so on ,” he says .

The IRS generally has 10 years to collect taxes it has assessed , along with interest and penalties . For those who can ’ t pay the amount in full , the agency offers a shortterm payment plan of 180 days to pay the bill in full , which is for people who owe less

“ Our recent experience on large debts is that the IRS is very aggressive on liens and levies and unwilling to negotiate a payment plan unless there ’ s a reasonable plan to pay off the debt and substantial proof that the plan is achievable .”

— Chris Mays than $ 100,000 in tax , penalties and interest . The agency also offers a long-term payment plan of monthly installments over up to six years for those who owe less than $ 50,000 in total . The IRS requires direct debits for balances between $ 25,000 and $ 50,000 .

“ The IRS is not going to just take your word for it that you can ’ t pay ,” Mays said . “ Debts greater than $ 1 million will be assigned to a collection officer who will work with the taxpayer to establish the appropriate payment approach and has all enforcement tools available , up to and including liens and levies and U . S . passport suspensions .

“ Our recent experience on large debts is that the IRS is very aggressive on liens and levies and unwilling to negotiate a payment plan unless there ’ s a reasonable plan to pay off the debt and substantial proof that the plan is achievable ,” Mays said .

The IRS sometimes offers taxpayers an “ offer in compromise ,” or OIC , which allows them to settle with the agency for less than the full amount owed . The agency says on its website that this avenue is reserved for situations where “ the amount you offer represents the most we can expect to collect within a reasonable period of time .”

Taxpayers can also apply to have their tax debt be stamped by the agency as “ currently not collectible ” in situations where they are absolutely unable to repay the debt and maintain their basic living expenses .

“ This involves penalties , and your debt doesn ’ t go away . But at least the IRS won ’ t be trying to go after you currently ,” Parrish says .

Each repayment option offers pluses and minuses , and each can be progressively harder to get and require more and more detailed financial information , advisors note .

A “ currently-not-collectible ” status , for example , is reserved for extreme hardship cases . “ For large debts , the taxpayer will have to provide substantial and detailed proof of ability or inability to pay , including lists of

10 | FINANCIAL ADVISOR MAGAZINE | MARCH 2024 WWW . FA-MAG . COM