If you are facing a debt with the IRS, whether because of a penalty or because of a problem with a previous year’s tax, the last thing you want to do is let the problem drag out. Of course, it can be scary to try to tackle any kind of debt problem head on because it tends to seem so intimidating. So what can you do to get ahead on your tax debt without it overwhelming you?
Know Your Options
If you owe money to the IRS, you really only have a few options for settling it.
- File Bankruptcy: While this should really be your last recourse, it is an option if your debt becomes insurmountable, and is likely a better option than facing jail time.
- Figure Out an Installment Plan: By using a resolution service with a company like Community Tax, you can work out a payment plan that is suitable both for you and the IRS. This way, you won’t be responsible for paying back the entire tax amount all at once, which truly would be overwhelming.
- Partial Payment Agreement: If the debt you owe is too large for you to settle in a reasonable amount of time, you can pursue a partial payment agreement. This way, you can agree with the IRS to only pay back a portion of the total amount you owe to the IRS over a long period of time.
- Offer in Compromise: A similar option in which you and the IRS agree on a lowered amount, but unlike the Partial Payment Plan, the Offer in Compromise requires you to pay back your debt quickly with at least one large payment up front.
- File for “Not Currently Collectable” status: You can propose to the IRS that they agree not to collect on your debt for a year. This will give you time to save up money and to prepare to deal with your debt in a responsible manner.
- Innocent Spouse Relief: If you file jointly with your spouse, you can file to relieve you or your spouse of guilt if you feel that one of you should not be held responsible for the penalty. Otherwise, you will both be held equally accountable for errors in tax payments.
Know How to Proceed
Once you have looked over your options in paying back the IRS, it’s time to figure out how to proceed. Your first step should be to contact a tax attorney firm, like National Tax Relief Attorney, or your certified tax preparer. Hopefully, if you used a tax preparer, you worked with someone who was certified, which means they will defend you before the IRS.
Legal defense can help you evaluate your current financial situation in order to determine which payment plan makes the most sense. This is important as you will not always be able to look at your own finances to determine what will be a reasonable payment plan or a reasonable proposal to the IRS.
Next, you should be prepared for your interactions with the IRS. It is important that you know your rights before interacting with the IRS. For example, the IRS is not allowed to enter your home unless invited. They are not allowed to approach you in private places, like your office, but they can approach you in public places like the lobby of your office building.
In general, you probably don’t want to talk to the IRS alone, if you can help it. Try to have all interactions with the IRS occur when you are with your attorney. Don’t fill out any tax forms while under duress. You don’t ever have to fill out a form right away. Instead, take your time, make sure you have all of your financial forms together, and make sure you have had your attorney review them.
The most important thing to do, once you have worked out a plan with the IRS, is to start planning for the future. Don’t avoid communications from the IRS or miss important deadlines. Most importantly, make sure that you work out a plan for the future with your attorney or accountant to ensure that you are saving money responsibly, paying bills on time, filing your taxes correctly, and budgeting time to be able to tackle your debt efficiently.
