Your return is complete and you owe more money to the Internal Revenue Service (IRS) than you can pay. Or, maybe you have a long-standing tax liability with the IRS. What can you do?
The IRS is the collection branch of the U.S. Treasury. Money collected by the IRS funds the government and many of its programs, including Social Security and other social safety net programs. In 2022, the IRS collected approximately $475.9 billion (before refunds) in income taxes. Many taxpayers are not able to pay their taxes—or are already struggling with an older tax debt on which penalties and interest have accrued. To save money—and a potential collection action by the IRS—it is important to know the available options.
Taxpayers of all income levels may at some point find themselves in need of a payment option from the IRS. A tax error, penalties for monies held in an unreported tax haven, or tardy turnover of employment taxes can result in a heavy tax debt. If you owe more than you can pay, consider these points to improve your financial picture with the IRS:
- Never ignore a notice from the IRS. Prior to a collection action or a levy, the IRS is required to provide notice to you. Ignoring notices will not stop forward movement on a tax debt. Unpaid tax debt means you are likely being assessed penalties and interest on the entire sum as time passes. The only thing that will slow down or eliminate a collection action is full payment of your debt—or—arranging with the IRS to pay the debt within a specified period.
- The IRS offers short-term and long-term installment payment plans. A short-term plan is expected to be paid in 180 day or less, while a long-term payment offers a longer term to pay. There are several types of long-term plans. There are no set-up fees for a short-term plan while there are varying fees for the longer-term plans.
- Both short and long-term payment plans continue to accrue penalties and interest on the balance due.
- Other Options Available: Beyond the payment plans, an offer in Offer-in-Compromise (OIC) may be a helpful option if you qualify and have money to pay your debt off relatively quickly,
If you are a business owner or have a considerable financial profile, consider speaking with a qualified tax attorney about your options before you reach out to the IRS.
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From offices in Chicago and Cleveland, Robert J. Fedor Esq. LLC serves local, domestic, and international clients challenged by tax litigation, criminal tax allegations, and offshore tax inquiries. When you need experienced representation on criminal tax matters, call 800-579-0997 or contact us online today.