No one ever wants to be in a situation where they can’t pay their taxes. Dealing with the IRS is never fun, and people will do whatever they can to avoid them. But, sometimes life gets in the way and we fall into problems that we can’t avoid—problems that make it difficult to pay our taxes.
So what do we do when this happens? The first thing to understand is that the IRS is made up of humans, and speaking with a tax professional or IRS agent may help alleviate any stress you may have. In fact, avoiding the IRS completely is the worst thing you could do if you find yourself in a situation where you can’t pay. The IRS has set up different options for people who have a hard time paying their taxes.
The best way to avoid issues with the IRS is to admit your problems. Once you do this, they can help you come up with an option that best fits your needs. The following are a few options that could be available to you.
The IRS will usually grant up to 120 days for those who need more time to pay their taxes. This is the easiest solution, as there are no fees to pay or applications to fill out, but it can be pricey: interest and penalties will continue to grow.
If you are able to pay some of what you owe, ask the IRS for an installment agreement. This allows you to set up fixed monthly payments that you are able to pay until the entire amount owed is paid off.
Offer in Compromise
If you are completely unable to pay what you owe, you can apply for an offer in compromise. This lessens the full amount you owe. If you are accepted for this option, you must pay all your payments on time for five years to keep the offer valid.
Currently Not Collectible
If you have a personal issue that makes it impossible to do any of the above, you can apply for a change in your account status. If your current financial situation proves that you can’t pay any of what you owe, the IRS will consider you as Currently Not Collectible. When you have this status, the IRS will avoid collecting any payment from you, but that doesn’t mean your debt disappears. In fact, penalties will continue to accrue, along with interest, so the final amount you end up paying will be much higher.
If you have had a change in your financial status or experienced a personal issue that has prevented you from being able to pay your taxes, contact a tax professional at Levy Tax & Associates. We will be able to walk you through your options and the steps you need to take to stay, or get in, good standing with the IRS. You can call us at 1-800-TAX-LEVY or visit our website to learn more.