If you know you are going to owe on April 15th, don’t panic. Instead, follow this friendly advice.
If you know you are going to owe the IRS, chances are you get a pit in your stomach this time of year. Having any type of debt is stressful, but owing the IRS is particularly nerve-wrecking. If you will owe on April 15th, don’t panic. Instead, follow this friendly advice.
Really, Don’t Panic
It bears repeating. Although the IRS has a reputation to the contrary, their customer service reps are probably the nicest people you will ever encounter in this kind of situation. Others before you have owed money to the IRS and others after you will owe too, so just relax. If you are not actively avoiding paying them, the IRS will not aggressively pursue you.
File on Time
Filing taxes is not what creates the debt, so file on time to avoid making your debt even worse. If you are late, you will just owe more fees, penalties and interests, so bite the bullet and file now.
Pay What You Can
Paying something now is better than paying nothing, and it is a good faith gesture to the IRS.
Make a Deal
It is not the easiest thing ever, but making a deal with the IRS is possible. Start the process by filing an Offer in Compromise form (form 656). It is for people who cannot immediately pay their back taxes because of a serious economic hardship. The process will not trigger an audit, and there is no harm in trying.
Pay on Time
Pay your installment payments before their due date. If you are late, you violate your agreement with the IRS. If you default, they can increase the interest and penalties you must pay.
If you cannot make a payment, call the IRS and ask about compromise offers or a reduced installment payment. Simply skipping a payment is one of the worst things you can do.
Talk to an Advocate
You can resolve problems with the IRS without an expensive lawyer, thanks to the Taxpayer Advocate Service. This independent organization helps taxpayers find proactive solutions to their debt problems. They will review your case and help you any way they can.
Hire a Lawyer
If you have followed these other steps and still cannot pay off your debts to the IRS, get professional help. You will need it, especially if you owe very large amounts of debt.
Enlist the services of a CPA or tax lawyer. It will likely cost you some money upfront, but it really is your only option once you have tried everything else.
Have you owed the IRS money? How did you handle the situation? Share your experience with our readers in the comments below!