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5 Ways to Handle IRS Tax Debt
You owe the IRS...you've checked to make sure the debt is correct and it is. Now you have to figure out how you're going to deal with it before the IRS comes and deals with you. These are the 5 most common steps you can take to deal with an IRS tax debt.
Step 1: Don't panic! The IRS isn't going to kick in your door the second you know you owe a tax debt. However just because you shouldn't panic; doesn't mean you should ignore the problem either. If you figured out you will owe before you filed, go ahead and file as soon as possible. If you don't file there is a non-filing penalty of 5% per month based on your income taxes. This 5% non-filing penalty increases by 5% each month that you don't file up to 25%.
Step 2: Buy yourself some time. You can send a written request to the IRS stating that you can't pay your debt right now. You can get a 45 day extension to pay your debt. Remember though, this is only a temporary solution, and you need to use this time to come up with a strategy, or borrow money, or figure out some other way to take care of your IRS tax debt.
Step 3: Deal with the devil. You should be prepared to deal directly with the IRS. The IRS offers several options to "help" you pay your tax debt. You need to be aware that whatever solution you setup with the IRS is not to your benefit. It's just like going to Vegas...the house always wins.
The most common way that the IRS will "help" you with your debt is by setting you up in a monthly payment plan. You should know that 97% of tax debtors who enter a payment plan fail. In fact the IRS wants you to fail, that way they can levy your bank accounts and wages because it makes it easier to collect the money from you.
Step 4: Seek professional help. You can gain the services of a tax professional to negotiate with the IRS on your behalf. Make sure the tax professional is legitimate, and always check with the Better Business Bureau before throwing down your hard earned money on the hopes of erasing your debt. Make sure whoever your dealing with is qualified to negotiate with the IRS. The IRS will only negotiate on your tax debt with one of these three professions: tax attorney, CPA, or licensed enrolled agent.
Step 5: You will have to pay. Even if you've been able to hold off your debt, and you've retained the services of a tax professional you will have to pay the IRS. You may be able to only have to pay a portion of the debt if you qualify for a settlement agreement. You may also have to pay back the full loan in an installment agreement.
Step 1: Don't panic! The IRS isn't going to kick in your door the second you know you owe a tax debt. However just because you shouldn't panic; doesn't mean you should ignore the problem either. If you figured out you will owe before you filed, go ahead and file as soon as possible. If you don't file there is a non-filing penalty of 5% per month based on your income taxes. This 5% non-filing penalty increases by 5% each month that you don't file up to 25%.
Step 2: Buy yourself some time. You can send a written request to the IRS stating that you can't pay your debt right now. You can get a 45 day extension to pay your debt. Remember though, this is only a temporary solution, and you need to use this time to come up with a strategy, or borrow money, or figure out some other way to take care of your IRS tax debt.
Step 3: Deal with the devil. You should be prepared to deal directly with the IRS. The IRS offers several options to "help" you pay your tax debt. You need to be aware that whatever solution you setup with the IRS is not to your benefit. It's just like going to Vegas...the house always wins.
The most common way that the IRS will "help" you with your debt is by setting you up in a monthly payment plan. You should know that 97% of tax debtors who enter a payment plan fail. In fact the IRS wants you to fail, that way they can levy your bank accounts and wages because it makes it easier to collect the money from you.
Step 4: Seek professional help. You can gain the services of a tax professional to negotiate with the IRS on your behalf. Make sure the tax professional is legitimate, and always check with the Better Business Bureau before throwing down your hard earned money on the hopes of erasing your debt. Make sure whoever your dealing with is qualified to negotiate with the IRS. The IRS will only negotiate on your tax debt with one of these three professions: tax attorney, CPA, or licensed enrolled agent.
Step 5: You will have to pay. Even if you've been able to hold off your debt, and you've retained the services of a tax professional you will have to pay the IRS. You may be able to only have to pay a portion of the debt if you qualify for a settlement agreement. You may also have to pay back the full loan in an installment agreement.
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