What to do if You Owe Taxes but Can't Afford to Pay
If you owe the IRS money, but can't afford to pay it, there are ways to get square with the government. The IRS will work with you to rectify the situation, as long as you're honest with them, and hold up your end of the bargain. The IRS views people who are unable to pay their taxes differently from those who intentionally evade paying. If you're unable to pay, you won't go to jail, but if you evade paying, you might. It's estimated that over 20 million Americans owe back taxes. That means you're not alone, and it also means there aren't enough jail cells for those who can't pay.
While there are things you can do to help yourself, there is one thing that will definitely hurt you. Whether you owe for the current tax year, or past years, the worst thing you can do is ignore the problem, or ignore the IRS. Ignoring the problem will not work. The IRS will not forget you owe them money, and unlike a fine wine, tax problems don't age well.
If you've just prepared your tax returns and discovered you owe more than you thought, and you can't afford to pay, file your tax returns any way. Not filing will add more penalties to your tab, and could lead the IRS to believe you're not acting in good faith. The first option available to you is an installment plan. If you owe less than $25,000, and have the ability to repay the debt within 5 years, this might be your best choice. To submit an Installment Agreement Request, you'll need to complete IRS form 9465, and send it to the IRS for approval. If your installment plan is accepted, you will pay interest on the debt, but the rates are quite reasonable. If you have the ability to repay the debt within 1 year, your installment request will almost certainly be accepted. Installment requests lasting more than a year will receive more IRS scrutiny.
If an installment plan isn't going to work for you, the next option is to request an offer in compromise. An offer in compromise will allow you to settle your tax debt with the IRS for an amount less than you owe. To apply for an offer in compromise, you'll need to submit a copy of IRS form 656. The IRS states that this program is designed for taxpayers who are in extreme circumstances, and is not an invitation to avoid paying taxes. If you have a good history of filing and paying your taxes, and you can prove that paying the entire amount you owe would create an economic hardship, your request might be accepted.
Remember, the IRS is willing to settle your tax debt, if you're willing to work with them. Communication and honesty will be the keys to your success. The entire process is something that you can do yourself, but if you owe more than $10,000, it's advisable to spend a little money to get professional help.
Author: Al Lewis
About the author:
If you owe back taxes, professional help is available at Tax Debt Help.
Article source: Free Taxes Articles.
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