How to Catch Up If You Have a Tax Debt

Tax Debt

Do you have a tax debt? You’re not alone. Over 11 million taxpayers in the U.S. owe the IRS about $125 billion in back taxes.

If you owe back taxes to the IRS, it’s often a true shocker. It’s something taxpayers never expect to hear from their accountants or tax consultants. For others, it might be a surprise to file your taxes and find out you owe more money than anticipated.

It’s a serious thing to deal with, and for many, it creates stressful situations that taxpayers need to address immediately.

The key is to find a plan to resolve the tax debt. It might be paying with cash, using a payment plan with the IRS, or setting up a tax settlement.

If you want a fresh start, keep reading below to learn more about dealing with outstanding tax debt.

Pay Your Tax Debt Now

The IRS provides taxpayers with several practical options for paying their taxes.

Individual taxpayers can pay their tax obligations using IRS Direct Pay, Electronic Federal Tax Payment System (EFTPS), same-day wire transfer, debit or credit card, cash at a retail partner, check, or money order.

Options for Taxpayers Unable to Pay Right Away

The IRS provides payment options if taxpayers cannot fully pay their debt.

A Payment Plan

A quick payment schedule might be an option. Taxpayers are permitted to request a 120-day short-term payment plan. Short-term payment plans are exempt from a user fee.

The option of a longer-term installment agreement or a monthly payment plan is available to taxpayers. Monthly payment plans or installment agreements are subject to a $149 user fee, which can be lowered to $31 if direct debit payments are made.

A financial statement must be included from an individual taxpayer who owes more than $25,000 or from a business that owes more than $50,000. 

IRS Offer in Compromise (OIC)

You can settle your tax debt for less than the total amount you owe by making an IRS Offer in Compromise (OIC). If you cannot pay your entire tax debt or doing so would put you in a difficult financial situation, this may be a viable option.

The IRS takes into account your particular facts and circumstances, such as:

  • Your ability to pay
  • Your income
  • Your expenses
  • Your asset equity

Utilize the IRS offer in compromise pre-qualifier tool to determine your eligibility and prepare a preliminary proposal.

When your offer represents the maximum amount expected to recover in a reasonable amount, the IRS typically accepts an offer in compromise.

Before making a compromise offer, consider all other payment options. Not everyone is a good fit for the Offer in Compromise program. Check the credentials of any tax expert you hire to assist you in filing an offer.

Catch Up on Your Tax Debt and Set Things Right Today

If you have a tax debt, don’t wait to catch up. The sooner you pay off your debt, the less interest and penalties you’ll have to pay.

You can catch up on your taxes by paying your tax bill now, or by setting up a payment plan with the IRS.

Check out the rest of our blog for more tips on managing your finances.

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BSV Staff

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