Owing Money to the IRS

Like all good Americans, you sat down and filled out all the proper tax forms for the Internal Revenue Service. Unfortunately, what you owe the IRS is much more than you anticipated and now you are in panic mode. Help could be on the way, as the IRS will probably work with you in finding a solution. However, it is important to know what options are available to you while working with the IRS and what you owe them.

Make Sure to File an Extension to Pay

It is imperative that you file and extension to pay with the IRS as soon as possible. There is a filing provision that allows taxpayers who might be suffering severe hardships to get extra time to pay their taxes. Penalties will not be incurred on the extension; however, interest will continue to accrue at a standard federal rate plus 3 percent per month. Filing Form 1127 the Application for Extension of Time and Payment of Tax Due to Undue Hardship is not automatically done, so filing it as soon as possible is important. Not all filings under this provision is granted; but, reasonable applications such as illness, job loss, death in the family or other extreme circumstances, will be considered and worth a try.

Work Out an IRS Payment Plan

By filing Form 9465, you are requesting to work out a payment plan with the IRS. This form can be used if you owe the IRS $25,000 or less inclusive of the tax, penalties, and interest you owe the IRS. However, if you owe the IRS more than $25,000 there will be a more in-depth analysis of your taxes including looking into your income, assets, and expenses to determine how much you can afford to pay the IRS every month.

Last Resort Settlement With the IRS

Usually, settlements are the last method that the IRS will employ with those who owe them taxes and have either a financial hardship, few assets, or a limited ability to pay the taxes owed. The IRS has many settlement options depending on whether you truly owe the taxes; you have the ability to pay, or other factors. If the IRS qualifies you, you might be able to pay less then your tax balance, interest, and penalties. Always file your taxes no matter what your financial situations are. You need to file your taxes every year and it is important to stay current with any tax obligations you have with the IRS. Failing to do so can cause the IRS to cancel any payment agreements you have with them. When in doubt about tax issues, it is always best to consult with an experienced CPA or tax attorney to help negotiate with the IRS.