Are you struggling to pay your back taxes?
Don’t worry, you’re not out of options. If you can’t afford your tax bill, or you’ve been avoiding an unexpectedly large bill for months or even years, you can feel hopeless. The worst thing you can do in this situation is to avoid taking any action at all. Fear of retribution from the IRS can keep you from doing anything at all, but this can just lead to additional fees and penalties.
If you find yourself struggling to pay back taxes, speak to a qualified tax advisor who can assess your personal situation to help you create a plan of action with the IRS. Here’s what to do if you face back taxes.
Avoid paying your tax bill with credit.
It can be tempting to pay a large tax bill with credit. This, however, is nothing but a temporary fix. Paying your tax debt with a credit card usually ends up costing you more than the original payment. The IRS charges a fee of up to 2.25 percent for credit card transactions which can add a sum of money on top of an already high payment.
The main expense of paying your taxes with credit comes in the form of high credit card interest rates. While the IRS has their own method of determining interest and penalties for payment, these are often less than what credit cards will charge for the same amount. Don’t put your credit score at risk by paying with your credit card.
Contact the IRS directly.
It’s normal to feel hesitant about dealing with the IRS, especially if you’ve avoided paying taxes for a while. This is why it helps to have a tax advisor to act on your behalf. The sooner you speak to the IRS about your options, the better. The IRS simply wants their taxes paid, and the sooner you reach out to them about your intention to pay, the more willing they will be to assist with the repayment process by waiving fees and penalties and creating a system for repayment.
The IRS offers a number of installment plans for those who are unable to pay their full balance at the time of bill. If you owe less than $50,000 in taxes, penalties, and interest, it’s relatively easy to apply for a payment plan. There are also a number of short-term agreements for smaller sums. Speak to a professional about your options for repayment in your situation.
If all else fails, you can apply for an offer in compromise.
There are some cases where you are simply unable to pay your back taxes and you’ll need to settle your bill with the IRS for less than you owe. This is called an “offer in compromise,” and it requires a number of forms and applications to process. These are difficult to get approved by the IRS, and if you wish to file an offer in compromise, you should utilize the assistance of a professional.
You don’t have to face back taxes alone.
Remember, if you’re facing back taxes and fear retribution by the IRS, you don’t have to deal with this alone. While it’s tempting to let your embarrassment and fear keep you from acting, but this only makes the problem worse.
Speak to a qualified tax advisor today to take back control of your life. You’ll be glad you did!