Owing money on your taxes is never a fun thing to deal with. Most people just wish their tax bills will disappear, but to avoid future problems with the IRS, you should pay off those tax debts as soon as possible. If you have trouble paying it all off in one lump sum, you may work on a payment plan to make things a bit better, even though you will need to be careful with the interest and other fees that you may have to pay throughout this repayment schedule. In most cases, if you are able to pay it all off at once, this is the best option to choose.
In some cases, people are not able to pay off their tax bill and they will just let it go. They figure that the debt will go away and won’t be as big of a deal to handle. But there can be lots of issues that come with not paying off your tax bill. You could lose out on future tax refunds, deal with more interest and penalties, wage garnishments, and even levies on your personal property. Over time, this can really start to wear on your finances and make life difficult.
If you are dealing with a late tax bill that is starting to make your financial life hard and you are worried about getting it all paid off because of a change in your personal situation or the bill has gotten too big, you should talk with your local tax professional. They will be able to work with you on an offer of compromise, a method that allows you to work with your tax professional to lower your tax bill and get it down to a manageable place.
What is an Offer of Compromise?
The offer of compromise is an option that you can choose to help out with your delinquent tax bill. In some cases, you may not be able to pay off the full amount that you owe on a tax bill. Perhaps you have let the bill go on too long and the interest and fees have doubled or tripled the amount that you owed in the beginning. Other times, you may have a financial situation change that makes you unable to pay the amount. For example, you could lose your job or have a disability that makes you unable to work and pay back the tax bill.
With the offer of compromise, you will be asking the IRS to lower the amount that you owe in your tax bill. You will need to present a case, often with the help of a tax professional, of why you would like the amount to be lowered and where it would work the best. Your tax professional will be able to help you gather all the information that is needed, including disability claims, wage papers, and more to prove that you are only able to afford the lowered amount. Once this is submitted, you will wait to hear back from the IRS as to their decision.
The offer of compromise is not something to take lightly. You need to have a legitimate reason why you are not able to pay back the full amount and a good plan for how you plan to pay off any amount that you are agreeing to pay back in the compromise. The IRS has to agree to lower your tax bill; if you are abusing this option, you are not going to do well with the IRS. Once the IRS has approved your offer of compromise, you will need to make regular payments and keep up with your end of the bargain with the deal.
Options After Approval
There are several options that you can choose to go with after the offer of compromise is approved. You will now be responsible for a lower tax bill and if you are able to make one lump sum payment on the amount, this is the best option for you. It lowers the interest and fees that you could pay on the money and just helps to get rid of the bill all at once. If the bill is low enough and you are able to make it work, paying the amount off in full will make a big difference.
For most people, if they are working towards an offer of compromise, they don’t have the money lying around to help pay off this whole bill at once. You are able to do a payment plan with the IRS as a condition of the offer. This will add a bit of interest during the payment plan, but you and the tax professional will have discussed the right amount that you can afford each month in your offer. You must make sure that you are submitting your payments on time each month to avoid future trouble with the IRS.
If you have a delinquent tax bill and would like to get it paid off, but are worried that the bill is just too high and you won’t be able to handle it all, you should find a local tax professional to help you out. They can discuss the offer of compromise with you and help you to figure out the right payment plan that will work the best for your situation. Contact our offices right away to get that tax bill taken care of.
1-2-3 Financial Services, Inc.