Past due taxes are a highly stressful event and it can be difficult knowing where to start. Despite the stern letters, the IRS wants the bill to be paid and offers several options to do so. By taking action, you can get your taxes organized and begin paying off your balance.
An outstanding IRS balance can result in additional fees, penalties, and collection actions being taken. Being proactive prevents that from occurring. The first step is to cover the basics by filing a tax return. Remember, even if you did not file your tax return you still owe the amount due. The IRS will file a return for you using the information that they have on file and assess a tax liability even if you have not filed your return. Filing your taxes before the due date not only prevents a late filing penalty but also gives you exact figures on what you owe so you can begin considering payment options.
The first step to paying a tax balance is to review your budget. An overview of your budget allows you to pinpoint recurring expenses, remaining monthly balance and areas where you can reduce expenses. For example, even little things such as reducing how often you eat out can free up money to reduce your tax bill. Also, consider alternative methods if they are feasible. A small bank loan or credit card advance can cover smaller tax bills.
There are several different ways to pay off a delinquent tax debt. The IRS accepts all common forms of payment and you can pay in person if preferred. There are several options concerning repayment these include:
- Picking up the phone. You have 120 days to pay a tax balance in full. Note that this 120-day limit does not require paperwork, an application fee, or forms. However, it is not a formal payment plan so interest and penalties still occur until the balance is paid off. More information can be acquired by calling the IRS.
- The IRS does offer a formal payment plan. A formal installment agreement does involve fees and an application process, however, it sets up an exact payment plan with a predictable monthly cost.
- If you are under a financial hardship an offer in compromise is another option. It allows you to pay off your balance for less than the full amount. It does involve certain fees, taxes must be properly filled, and payments made on time for five years to qualify.
- Finally, there is Currently Not Collectible. Essentially the IRS agrees that you cannot realistically pay your tax balance. While interest and penalties do still occur, the IRS will not actively try to collect the amount due (they may keep any yearly tax refunds, however) and may file liens to protect their interest. The bill remains due when you are again able to make payment.
A tax bill should not be ignored. It only leads to more fees and penalties. The IRS may file liens on your assets, seize your bank accounts and file garnishments on your wages. By being proactive you can get your taxes paid and avoid associated expenses and penalties. Contact a tax professional from Fricke & Associates, LLC today at Frickecpa.com or call 770-216-2226 for more information.