5 Ways to Pay Off IRS Debt
Millions of Americans owe the IRS in back taxes, penalties and interest. If you are one of the millions who owe back taxes, it is incredibly important to be proactive with the issue rather than waiting until you are in trouble with the IRS. While learning you have tax debt can be overwhelming, you can easily resolve the debt by following a few simple steps.
1. Review All Documents
If you owe the IRS money, first find out why. Review all documentation from the IRS including your tax returns, business paperwork and letters from the IRS. First, look for filing errors on your end. Be sure you marked your income and deductions correctly. Additionally, look for mathematical miscalculations, computation errors, misspellings and status errors. One incorrect “checkmark” or calculation can cause major issues.
If you received a notification from the IRS and you don’t understand what it means, consult with a tax relief specialist. Many people disregard tax notifications, which leads to even more problems with the IRS. Tax paperwork can be very confusing, so if you do not understand an IRS notice or letter, find someone who can explain it to you or help you directly as your tax representative. If you truly owe what the IRS states you owe, the problem will not disappear on its own. It’s important to address the problem in a timely manner to avoid added penalties and interest.
2. Address Penalties and Interest
When you owe tax debt, you not only owe the stated amount, the IRS charges penalties and interest on the amount owed. This makes the amount owed significantly larger and more difficult to repay. You can, however, minimize penalties and interest under certain exceptions. You can also seek a full or partial abatement of the penalties, which would result in an overall lower balance due. If the IRS denies your request to remove penalties, you can submit a formal appeal to remove them from your account. The key to handling penalties and interest is to address them quickly before they accumulate even more.
3. Apply for an Installment Plan
An installment agreement is an agreement between the IRS and the taxpayer to pay down the existing debt in smaller, more manageable payments over time. As long as the payments are made in full, it keeps the IRS from issuing levies and filing liens. Before an installment agreement can be established, the taxpayer must be in compliance with certain tax obligations including filing, federal tax deposits and withholdings. One important note with installment agreements is that interest and penalties still accrue throughout the life of the agreement.
While this may sound like a great option, not everyone is eligible for an installment agreement. You must meet necessary criteria to qualify. If you do meet the necessary criteria, it is critical that you understand the terms of the payment plan and how to keep the agreement from defaulting. If you’re considering an installment plan to pay off your debt, also consider working with a tax relief specialist. At Landmark Tax Group, our team consists of former IRS Auditors and Collectors, so we know how the IRS works and how to help determine if an installment plan is right for you.
4. Consider an Offer-in-Compromise
Another way to pay off IRS debt is through an offer-in-compromise, which is commonly referred to as a tax settlement. This is an agreement between the IRS and a taxpayer that settles the debt for less than the amount owed. Similar to an installment plan, you must meet specific criteria in order to qualify. In general, for an offer-in-compromise to be accepted, the IRS has to determine that it can collect more from a taxpayer through the settlement than it can over the life of the remaining collection statute.
If you think you are eligible for an offer-in-compromise, it is highly recommended that you work with a tax relief specialist. When our clients are potentially eligible, we sit down with them and do an analysis and presentation of their financial situation. This is key in determining whether or not an offer-in-compromise is right and if it will even be accepted. The IRS has strict guidelines and only accepts offer requests under certain conditions. If our clients do qualify for this special debt repayment option, we assist with the qualification analysis, preparation and submission to get the best tax settlement possible.
5. Pay in Full
Ultimately, if you are able to pay your tax bill in full, you will save the most amount of money. If you cannot pay the full amount, you have the option to pay as much as you can to avoid the penalties and interest previously mentioned.
The IRS makes it very easy for taxpayers to pay. The IRS Direct Pay tool is a safe, easy and free way to pay your taxes directly from your checking or savings account. This process can be completed online through the IRS website.
If you are unable to pay your taxes immediately, but what you can pay is within 120 days or less, you may qualify a short-term extension. You can apply for an extension online or by contacting the IRS by phone. Typically, there is no set-up fee for this type of extension.
If you have IRS related debt, it’s essential to address it immediately. Review all documentation and choose the best solution to pay off the debt. Not all taxpayers qualify for the programs provided by the IRS, but at Landmark Tax Group, our experienced personnel of CPAs, Enrolled Agents and former IRS Agents will navigate you through the collection process and assess your financial situation to find the best and most favorable course of action.
We’ve saved clients thousands of dollars with the IRS through tax settlements, installment agreements, levy releases, and penalty removals. Get help with your IRS tax debt problems by contacting us today at (949) 260-4770 for your Free Consultation.
Not only are we licensed Tax Relief Specialists, we are also former Senior IRS Agents that now serve the best interests of taxpayers like you – all we do is handle IRS Tax Relief matters, all day, every day. Speak to us for FREE at (949) 260-4770.