What to Do When You Owe the IRS Money
Many things get people stuck in a tax debt quagmire with the IRS, including personal income tax withholdings that don’t offset income tax liability, owning non-income property of significant value, and winning heavily-taxed prizes. The taxes, size of debt, and assets taxed vary widely, but they are dealt the same financial hand of fate: someone will owe the IRS money. Where the decimal point will fall, and how to pay the IRS the money owed, are the prime concerns.
I Owe the IRS Money: Now What?
When you first open the friendly mailing that states your tax debt in bold font, financial order can become entropic in a wink. A debt-based game of mental dominos ensues, as you rethink how to spend, how much to spend, and when. It’s instant damage control. But after all of the chips fall, the balance of several digits remains — and because time is money to Uncle Sam, your debt has a due date, too. If you can’t write a check to pay it, what should you do?
Peace of Mind Begins with a Plan
Before making any big, quick decisions, such as liquiding jewelry you wouldn’t otherwise sell or accepting a bank loan that has less than ideal terms, stop and take a breath. If you owe the IRS money, and the debt is more than you might normally considering carrying, it probably took at least several months to accrue. The debt may even be several years old, and you’re just now getting the news.
If the debt is too large to pay by the due date, the best option is consulting a debt specialist. They may be able to help you choose a debt relief payment plan that the IRS accepts. But before we discuss plans, let’s respond to a question that may be on your mind: does your tax debt put you in jeopardy of jail, or do you simply need help with debt that needn’t involve an attorney?
Criminality as a Spectre of Worry
As they consider how to pay the IRS, some taxpayers worry they are in more than a difficult financial situation. They also fear their debt indicates a federal crime has been committed. In some instances, they are right. However, the vast majority of tax debts are incurred without criminality. Tax fraudsters act with premeditation; they want to pocket what they owe the IRS.
Unless you knowingly defrauded the IRS, and they have clear proof indicating that you did, you won’t be reading up on tax law as a jailhouse legal scholar. If you made tax mistakes — even multiple mistakes, year after year — the government considers them mistakes that demand financial recompense, not felonious violations that could put you in a prison yard.
Preparing to Pay: Mindset Matters
There will be short layover between the time you receive a statement that you owe the IRS money and the implementation of a plan for how to pay the debt. During the interlude, you’ll meet with a debt consultant to select a payment plan. You’ll also have time to reflect on your situation. As you do, try not to persist in a hindsight of despair. Instead, try to learn from what happened, and see a brighter future.
Nearly everybody who owes the IRS money — and all taxpayers, for that matter — have tax situations comprised of tedious facts, which results from two things: the alignment of taxpayer identification with respective tax status, and the terms by which the IRS — and parties with which it works — organize the multitudinous details to help prevent their own and others’ errors.
If you know what’s owed, why it’s owed, and when to pay, you have the information you need.
How to Pay the IRS: Three Options
The IRS may be inflexible about collecting debt, but they are more flexible about payment options for debt collection. Here are three ways to pay tax debt you can’t pay upfront, in full:
1. Installment Agreements
If you owe the IRS $50,000 or less, you can file for an installment agreement, which gives you up to 72 months to pay the total amount owed. Payments are made monthly. In addition to making out a check, you can set up automatic debit card payments to ensure timely remittance.
2. Loan / Credit Payment
You can also use a bank loan or credit card to pay what you owe the IRS, and then repay the loan or credit card balance. This trades one debt for another, but it can be to your advantage if the loan or credit card interest rate is significantly lower than the interest rate for the tax debt.
3. Offers in Compromise
In this arrangement, the IRS accepts a lower total amount than owed, which it receives from you within a shorter timeframe than extended payment plans would provide. The offer is accepted if the IRS feels the amount is the most money it could collect from you within a “reasonable” period of time.
If you owe the IRS money for personal taxes, you may not have to pay it all at once. The debt consultants at Liberty Debt Relief can help you choose an affordable plan for how to pay the IRS that reduces stress. Ready to eliminate tax debt? Contact us today for a free consultation.
Leave a ReplyWant to join the discussion?
Feel free to contribute!