After the rush of preparing your files and information to complete your tax forms, it can be very disappointing to discover not only are you not getting a refund, you actually have to pay into the IRS. Not long after, the disappointment may be replaced by the fear you can not afford to pay your taxes back, especially in a lump sum with your prepared return.
So what should you do?
Here are some tips to help you survive paying money back to the IRS:
This is not an uncommon occurrence and the IRS has measures in place to help you. Worrying about the situation will get you nowhere fast so remain calm and do what is necessary to prevent further problems.
Send In the Return
If you do not have the money or the means to get the money you owe, you still need to send in your tax return on time. If you send it in late, you’ll face fees and penalties you likely can not afford either. If you neglect to send in your return at all, you can face criminal charges. Even if you owe a lot of money, send in the return on time.
Look for the Cash
After initially panicking about the situation, you may be able to locate resources for getting the full or partial amount of money you owe. Check in with your savings account, relatives, and investments to see if you can come up with the cash. The faster you pay the less interest you need to pay back. Do make rational decisions about where you find the money. A cash advance on your credit card may seem logical but it may cost you big time financially. Consider all of your options before making a choice.
Ask for Help
The IRS can help you establish reasonable payments if you can not pay the tax bill all at once. Once you have filed your return, the IRS will send you a letter stating the balance owned. During that period of time before you receive the letter, you can work to find the money.
If you are sure you can not come up with the money in full, you can ask for an installment plan. Essentially, the government just wants its money and they will work with tax payers within reason to help settle the debt. There is an Installment Plan you can request, which will allow you to ask the IRS to approve a payment amount in monthly installments you feel you can afford. As long as the amount is decent and the likelihood the loan will be paid off within 12 months, the IRS generally grants the Installment. This will cost you additional money in fees but it is certainly a feasible avenue to consider.
Offer of Compromise
If you are not approved for an Installment Plan, another option may be to request an Offer of Compromise. This means you can offer to make a one-time lump payment or schedule several fixed payments monthly. There is a difference between the Offer of Compromise and the Installment. The compromise is more involved and requires an application, a personal financial statement, and a $150 application fee. All cases are evaluated individually and approval is not guaranteed.
Regardless of what you owe and how you can pay it back, the most important issue is that you follow through with the entire process until paid in full. Otherwise, the fees and penalties only add to the burden and you can risk serious financial disabilities down the road.
This article is provided for Backtaxeshelp.com, a site designed to help you with IRS back taxes. Owing back taxes to the IRS is stressful, and negligence will only worsen the situation. Learn how to pay back taxes.