How to Settle Your Tax Debt with the IRS
So, you’ve done the calculations and realize that you owe the IRS money this year. Your next thought is probably how am I going to pay? We have compiled some basic information to help guide you through the payment process, depending on your financial situation.
Payment in Full
The best possible way to settle your tax debt with the IRS is to pay them in full by April 15th. This allows you to avoid accruing any taxes and penalties, so you are only paying exactly what you owe. The IRS accepts checks, money orders, credit and debit card payments and electronic payments including an automatic withdrawal from your bank account. You should note that even if you file a request for an extension, you earn more time to file your return but do not necessarily have more time to make your payment.
Options If You Cannot Pay in Full
If you are in a situation where you are unable to pay the full amount of your tax debt all at once to the IRS, there are several options for you to consider.
- Installment Agreement: In many circumstances, if you cannot pay your tax bill all at once, you can apply for an installment agreement, which is essentially a monthly payment plan for the amount due. There are several types of installment agreements, depending on how much you owe and how long it will take you to pay that amount off. The IRS generally charges a $120 fee for this service. In some cases, the IRS can file a tax lien against you, which could affect your credit score.
- Offer in Compromise: If you simply cannot afford to pay the tax debt that you owe, you may be eligible for an offer in compromise, which settles your tax debt for less than you owe. The IRS realizes that there are certain cases in which it is better to receive some portion of the tax debt rather than potentially not receive any at all. As you might expect, there are very strict specifications for this type of program. The IRS generally approves less than 25% of those that are submitted. You should be aware that it will take between one and two years to complete the offer in compromise application process. Generally, there is a $150 fee to apply for an offer in compromise.
Managing This Process
If you are weighing the options for the best strategy for settling your tax debt, you may want to consider hiring a tax professional for help. A tax professional can review your return to be sure that your calculations are accurate and that you actually owe the amount that you think you do. In addition, a tax professional can help you with all of the paperwork required to request an installment agreement or an offer in compromise.
Success Tax Relief is a tax firm that has extensive experience helping clients negotiate settlements with the IRS. The professionals at Success have a proven track record of communicating directly with the IRS and can give you the best possible chance of getting approval. Contact us today and find relief from your tax debt.