5 Options For Paying Your Tax Debt…When You Can't Afford It.
5 Options for Paying your Tax Debt…When You Can't Afford it.
There is nothing more certain in life than death and taxes, but did you know that there are 5 options when it comes to paying your tax debt.
Option 1 – Pay in Full
The first option is to pay in full and on time, but what if you can't? Let's examine your other options.
Option 2 – Short Term Payment Plan
If you're able to pay of the full amount within 120 days, you can call the IRS for an official short term payment plan. Interest and some penalties will apply, up to 5% of your unpaid taxes each month.
Option 3 – Long term Payment Plan
If you can't pay your tax debt off within 120 days, you can contact the IRS and for an installment plan that will take longer than 120 days to complete. Like the short term payment plan, interest and fees will still apply.
Option 4 – Offer in Compromise
If your tax bill is larger than you are able to pay, you can submit an application for an “Offer in Compromise”. if approved, you will only pay a portion of your current tax debt, however you must file and pay all of your taxes within the next 5 years. Once again, fees will apply to this program.
Option 5 – Currently Not Collectible
If you can't pay any of your taxes, you must contact the IRS as soon as possible. If the IRS agrees that you are unable to pay your taxes and maintain reasonable living expenses they may deem your tax debt as “Currently not Collectible”. However, it is important to note that this tax debt does not go away and penalties and interest will continue to be applied.
The bottom line is to be proactive. If you have difficulty paying your taxes, don't ignore the situation. Unpaid taxes can result in a tax lien against your property, or your property being seized. The IRS may even have your passport revoked along with filing charges against you.
To avoid problems with the IRS in the first place, make sure you file your taxes on time, pay what you can and contact the IRS sooner rather than later to put a payment plan in place.
If you need help with dealing with the IRS, contact the Tax Payer Advocate Service. They help people resolve tax problems with the IRS and can make recommendations that may prevent problems.
Lori Stratford is the Social Media Strategist at Navicore Solutions. She promotes the reach of Navicore's financial education to the public through social media and blog content.