There?s a pit that you get in your stomach when you know that you?re going to owe the IRS at the end of the year.
Owing any kind of debt is always stressful, but debt to the IRS is particularly worrisome. Perhaps this is because there?s no statute of limitations on the amount of time the debt will follow you around.
Here?s some friendly advice for people who know they?re going to owe on April 15.
Don?t Panic
This is the big one. Don?t panic. Despite their reputation to the contrary, the IRS customer service representatives are some of the friendliest people you?re ever going to owe money to.
You aren?t the first person to be in the hole to the IRS and you won?t be the last, so relax. The IRS only aggressively pursues people who are actively avoiding paying them back.
Unless you?re one of those people, you have nothing to worry about.
File on Time
If you fail to file on time, you?re just going to end up owing more in penalties, fees and interest than you would otherwise.
It?s a bit like going to the doctor when you?re sick: The visit to the doctor isn?t what makes you ill and filing your taxes isn?t what creates the debt. File on time to avoid making your debt load to the IRS even larger.
Pay What You Can
You might not be able to pay everything right now, but you should pay what you can when you file.
Not only is this a good faith gesture to the IRS, it will begin the process of moving your debt load down.
Trying to Make a Deal
Making a deal with the IRS isn?t the easiest thing in the world, but it is possible. You begin the process of making a deal by filing a Form 656, Offer in Compromise.
This is for people who will have a serious economic hardship paying their back taxes to the IRS.
While you might not think you fall under that category, there?s no harm in trying ? it certainly isn?t going to increase your debt load, nor will the process trigger an audit.
Keep Your Installment Payments
It?s important to pay your installment payments on time. To not do so is to violate your agreement with the IRS.
If you default on your payments, they can come after you for the full amount and increase the penalties and interest on the amount that you owe.
If you find that you can?t make the installment payments as agreed, call the IRS. There are a number of options they can offer, such as a reduced installment payment or a compromise offer.
To simply stop making payments without communication is one of the worst things you can do.
Talk to an Advocate
You don?t need to hire an expensive lawyer to help you resolve your problems with the IRS.
The Taxpayer Advocate Service is an independent organization that exists to help taxpayers looking for proactive solutions to their repayment problems.
You can contact the TAS through a toll-free number. They?ll take a look at your case and advise you as to whether or not they can be of assistance.
Hire a Lawyer
When you?ve done all you can and you?re still unable to pay off your debts to the IRS, it?s time to consider professional help. This is generally for people who have very large amounts of debt and need to do something to lower the amount.
A tax lawyer or CPA has more experience going up against the IRS in his little finger than you do in your whole body. It might cost a bit of change up front, but when you?ve tried everything else, this is your only option.
But Remember ? Don?t Panic
We?ve discussed the most common ways that IRS debt gets resolved, as well as the absolute worst. Chances are good that yours is going to be closer to common and benign, than nightmarish and Byzantine.
Remember what we said at the beginning: IRS customer service agents are very helpful and generally willing to work with people making a good faith effort to repay their debts.
?7 Tips for Taxpayers Who Owe Money to the IRS? was written by Nicholas Pell.?
Source: http://www.mint.com/blog/planning/7-tips-for-taxpayers-who-owe-money-to-the-irs-0312/
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