If you receive a tax bill for more than you expected, your first instinct is to panic. Of all the people you could potentially owe money to, the dreaded IRS is one of the most frightening. They are expected to be prioritized over other debts because they have powers that other lenders do not have. Here are some options to face the situation and find the extra money to pay off the debt.
1. Do not postpone your tax return . If you cannot pay an unexpected tax debt, it is tempting to send your tax return. Unless the IRS can prove that you are deliberately trying to stop paying your tax assessment, they cannot prosecute you for not paying your tax assessment. If you postpone the sending of your tax return or do not submit it at all, you risk the IRS placing you in the tax evasion category.
2. Plan your debt repayment s. A tax debt is perhaps the newest debt that you have earned, but that does not mean that it should be at the bottom of your priority Latch list. The IRS will expect you to place a tax debt for any other debts, even if this means that you are lagging behind other debt repayments or raising more debt to pay it off. This requires that you re-evaluate all debt repayment plans that you already have.
3. Consider Offering in compromise agreements . If you are already struggling to make ends meet and you will not be able to repay your tax debt without getting into serious financial difficulties, an Offer in compromise agreement may be the answer. To be eligible, you must complete the IRS Form 656 Offer In Compromise registration form and specify in detail how dire your situation would be if you were forced to repay your tax debt in full in the near future. If you are approved for an OIC agreement, you must offer a set of fixed or one-off amounts for the reimbursement of your tax liability, within the maximum that you can afford. Getting the IRS to agree to these agreements is VERY rare, so don’t count on it, but they will agree to an OIC if you have absolutely no assets and you have no real hope of drastically increasing your income.
4. Search for temporary extra income . You may want to look for a part-time job or a weekend job so that you get enough extra money to repay your tax liability. If that is not possible, try selling something on eBay, Craigslist or in a garage sale to scoop up enough money to pay back the tax bill.
5. Look at streamlined repayment plans . If you have too few other options to repay your tax liability, you can request a streamlined repayment plan via the IRS form 9645 Term Agreement. The IRS will use the information on this form to decide whether you will be offered the option of paying off your tax liability in regular installments over a five-year period (with interest on top). To be eligible, your debt must be less than $ 25,000 and you must have the means to repay it (plus interest) within the five-year period. You will be charged $ 102 when approved, which is usually deducted from your first repayment.
6. Use your credit card (s ). If the tax liability is not too large, consider using your credit card to pay it off. This can increase your credit card debt, but it gives you the freedom to focus on paying your card (s) without having to worry when the IRS is calling. However, this should only be a last option!
It is especially important to contact the IRS as soon as you realize that you are able to pay your tax debt in full. They can advise on the best repayment option and if there is nothing else, it indicates that you are not deliberately avoiding the repayment and willing to cooperate with them.
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