The theme of TurboTax commercials reminds us that the fear of the unknown can really control our lives and force us to procrastinate on completing our tax returns. We may fear that we may make mistakes that will lead to unfathomable penalties. We may also fear the power of the federal government to collect on back taxes.
So if you are barely making ends meet (especially if you are a self-employed business person) and you concerned about how deal with tax debt you can’t readily afford to pay off, it is undoubtedly very stressful.
However, there are a number of options available. This post will highlight a few.
Ask for a payment plan – Like any other creditor, the IRS appreciates receiving regular payments on past due debt. So it is possible to establish a payment plan that will allow you can pay off the debt over time. As long as you remain current on your plan, the IRS will keep their distance. While a payment plan is ideal, you are still responsible for accumulating interest until the debt is paid off.
Ask for an extension – Depending on how much you may owe, you may only need a few extra months to pay your tax bill in full. An extension will allow extra time to pay your bill in full without a payment plan.
Agree to an Offer in Compromise – If there are legal questions regarding the amount of tax debt outstanding, you could negotiate an offer in compromise (which is akin to a settlement) to where you pay less than the stated amount owed.
If you have questions about payment options or the legitimacy of your debt, an experienced tax attorney can advise you.