When it comes to tax season, there are a lot of things that you have to keep in mind. You must make sure that you are getting all the right numbers in their place and that you didn’t miss out on some important papers that could help you to file the tax return a little bit better. Getting the return handed in on time is another challenge as well, and most people give a sigh of relief when they are finally done with their tax returns and can move on to other things during their day.
During some years, you may find that you actually owe on your taxes. This amount is usually fairly small since you were paying in through your employer each paycheck to avoid a larger bill. But for those who worked from home or ran their own businesses who didn’t pay estimated taxes, this could end up being a larger amount. And what are you going to do when the tax bill is more than you can afford.
In some cases, you can work with your tax professional to come up with a payment plan. This is not the cheapest way to pay back the debt since you are still going to need to pay fees and interest until the amount is gone, but your fees are going to be much lower compared to not paying the debt back at all. If you would like to set up a payment plan with the IRS, make sure to talk to your tax professional before getting started.
Setting it Up
It is best to set up the payment plan as early as possible. Doing so before your tax debt is even due can make things easier, and the IRS is more likely to be willing to work with you on this issue since you thought ahead and weren’t trying to get away from paying the bill. Coming up with the payment plan that will work with your current obligations and still fit into what the IRS will accept is not always that easy.
Working with a tax professional can make it all so much easier. They can help you to determine how much you are able to comfortably afford without eating into too much of your budget and still setting aside plenty to pay for all of your other bills. You are going to have to be reasonable on the amount that you can pay though; telling the IRS that you can only pay $10 a month on a bill that is $5000 is not going to work and doesn’t even cover the interest on it. But if you can come up with a decent amount that will pay the debt off as quickly as possible, the IRS will work with you on this. Your tax professional will work alongside you to get the best payment plan possible.
Things to Keep In Mind
There are a few things that you should keep in mind when it comes to your tax bill. First, even when you set up a payment plan, you are still going to be required to make interest payments and once the bill is late, even if you started the payment plan before the due date, there will be some fees and penalties. But you will not incur an unnecessary amount since you agreed to make payments and are keeping up with that obligation.
Another thing to remember is that since you agreed to make the payments, it is important that you keep making these payments. Missing out on a payment could put you in some trouble and the IRS is not going to be very happy that you are missing out on these things. You will incur more interest and penalties, and depending on how late you are with the payments, you could have issues with wage garnishment and levies on your personal property. So once you agree to make the payment, take the time to pay it off each month and do not be late with these payments.
You will be responsible for making payments until the whole amount is done. Whether this takes a few months or a few years, you are not off the hook until that amount is paid. If you have a payment plan that takes more than a year and you receive a tax refund the next year, your refund is going to be put right towards the amount that you owed. This can help to pay off the amount a bit earlier, saving you on interest and getting the payments to stop earlier than expected. In addition, if you have times when you are able to pay a bit more back each month, go ahead and do this. The more you pay now, the less you have to deal with later and soon the tax debt will be done with.
It is important that you pay off your tax debts each year. Everyone is expected to do this and when you miss out on the payments, you could be in for a lot of trouble. When you owe on a tax debts but know that you are not able to pay it all off at once, consider getting a tax professional to help. They will work with you to come up with the best payment plans that will work for your needs.
Larry Gurewitz