What to Do When Your Tax Bill is More than You Can Pay
Taxes aren’t anybody’s idea of a good time and they become especially stressful when you know that you are likely not going to be able to pay your bill outright. We’ve talked before about some of the options that are available to you when you know that you can’t pay what you owe before your taxes are due.
Today we’re going to help you figure out what to do when you’re staring at a huge bill from the IRS and feeling the edges of panic starting to take hold.
The IRS wants to get paid. More importantly, the IRS will always find a way to get paid. It might levy a judgment against you that will allow them to garnish your wages. If you are self employed, they might garnish your bank account.
What matters here is that you cannot hide from your tax debt. This is not credit card debt—it won’t go away if you just stay off this debtor’s radar for a few years. In fact, the longer you duck your tax debt, the worse things are going to be for you. You could even wind up in jail. Seriously.
Contact the IRS
Before you can figure out a plan, you have to figure out exactly how much you owe. A lot of people decide that the best route they can take is to immediately work with a tax settlement firm like Authority Tax Service. These firms might be able to help you quite a lot but before they can help you, you need to know your numbers. Call the IRS and talk with a representative there.
According to US News and World Report, there are two basic options that you will be given by the IRS once you convince your representative that you won’t be able to simply take out a loan or put your tax debt on a credit card:
The monthly installment plan: this is just like a credit card or loan. You agree to pay the IRS a certain amount every month until your tax debt is paid off. The biggest problem here is that you’ll often have to either pay an upfront “deposit” amount or agree to have that amount added to your balance due. You’ll also have to pay interest and penalty fees.
An offer in compromise: This is a “special circumstances only” situation, like if paying your tax burden would render you homeless or in dire financial straits and if the amount of your assets, if sold, would not cover what you owe. It is not a “get out of jail free” card and should not be treated as such. Qualifying for this is also incredibly rare.
If you don’t qualify for either of these things or if you’re uncomfortable negotiating these things on your own (a totally normal way to feel), you are absolutely allowed to hire someone to help you navigate the process.
Getting Professional Help
Trying to navigate the IRS system is problematic even for experts, so going it alone might not be the best idea, especially if you’re trying to settle your tax debt for a lower amount than you actually owe. One of the best things you can do, according to the Authority Tax Services site, it is to get professional help navigating the system so that you don’t accidentally make things worse for yourself.
Remember: the IRS’s goal is to get paid and, to them, something is better than nothing. This means that it is better to work with them than to try to hide from them.