Creating a Payment Plan for Back Taxes
Each year, thousands of American taxpayers find themselves unable to pay their tax debt to the IRS. Interest and penalties quickly accumulate and suddenly, you can find yourself owing a significant amount in back taxes. It is easy to fall into the trap of thinking that you will deal with it later, but putting it off is a mistake that many make when it comes to dealing with the IRS. Instead of ignoring the problem or wishing it away, deal with it head on and come up with a plan to manage the debt. Here are some easy and manageable options that the IRS offers that can help you take steps toward paying those back taxes:
The IRS actually understands that you may not be able to pay all of your back taxes at one time. Many times, given financial constraints and other debts, this is simply not feasible. The IRS grants many individuals what they call an installment agreement, which allows you to pay the IRS back over time. It is very similar to a credit card payment in that you make monthly payments to the IRS for the original debt plus any interest and fees until the debt is paid off. You can make these payments to the IRS through direct debit, check, money order, credit card or payroll deduction.
You should note that there is a standard fee of $120 to set up an installment agreement and there may be other fees for setting up special types of payment. There are different types of installment agreements depending on how much you owe, so you should consult a tax professional and/or the IRS website for more information about this option.
Offers in Compromise
An offer in compromise is an agreement that you, the taxpayer, makes with the IRS to pay them less than the amount that you actually owe. This is generally granted for instances of financial hardship in which the IRS realizes that getting some of the debt paid may be better than getting none of it paid. The IRS requires significant paperwork for an offer in compromise agreement and generally approves less than 25% of all requests, so it is very important to carefully complete the paperwork for this process.
Various Methods of Payment
It is important to note that the IRS accepts multiple methods of payment (check, money order, electronic debit) and it may be advisable to pay a portion (or all) of your debt via credit card if this is feasible in your situation. Very often the interest rates for credit cards are actually less than the interest and fees that can accrue on top of your tax debt with the IRS.
Your Best Bet May Be to Get Some Help
It is never advisable to ignore a debt that you owe to the IRS. You are much better off being proactive and finding a way to pay it off, whether you do it all at once or over time. And you may actually find that the IRS is more willing to work with you than you might expect.
One important factor is how you communicate with the IRS. Partnering with a professional tax firm may be a good strategy if you owe back taxes. A tax firm can look at your return, verify the actual amount owed and help determine the best strategy for paying back taxes.
Success Tax Relief has extensive experience negotiating installment agreements and offers in compromise directly with the IRS. If you would like to explore your options with Success Tax Relief, contact us today!