If you don't pay your regular bills, you are charged interest as well as additional late fees or penalties as the IRS call them. That's right; the IRS will treat your bill like any other company. An important fact to remember is that tax debt does not go anywhere, in fact the government has many more collection privileges that a regular company or creditor.
Besides using a collections agent to attempt to collect what you owe, the IRS may garnish your wages, place a tax lien on property or seize any future refund. At this point in time, your financial adviser would only be able to advise you on how to go about paying the IRS in order to get out from the trouble on hand. In order to prevent results mentioned above, take these six tax paying tips to heart when you are thinking of avoiding the bill.
1.For a fee, you can set up installment payments with the IRS. They will take your debt and split it up into several payments. This way you are not subjected to a full payoff and still make the steps necessary to make good on your taxes. Negotiate with the IRS your minimum payment. Like any other creditor, the IRS would like to hear from you about this offer prior to putting your debt into default.
2.You could take the payments into your own hands by charging your debt. That's right; place your tax liability onto a credit card. Be sure to use one with low interest and be aggressive in paying it off in the least amount of time so it does not ruin other financial demands in the process.
3.If you are under severe financial hardship, call the IRS and talk to them. You could use a CPA to do it for you, but the IRS appreciates talking to the taxpayer directly. This process will not eradicate your debt, but it could be put on hold and be reevaluated at a later date.
4.Make an offer in compromise. This is your chance to negotiate your debt with the IRS. In this negotiation, you will be requesting that the IRS settle your debt for less than what you owe. This is not something which the IRS does freely. You as the taxpayer will have to show cause and prove that your liability cannot be afforded or that paying it would case extreme economic hardship. The burden is on you to make your case. It never hurts to ask.
5.File Form 1127 along with an explanation of why paying your taxes now could cause financial hardship. This form is a request for a short 120 day extension. The form is complicated and takes time to detail assets, spending and income. The IRS does not approve many requests, but it doesn't hurt to try.
6.If you have a reasonable cause (illness, military duty, incarceration) Form 843 may save you lots of money. This from is a request to waive penalties. If you have been in good standing with the IRS, your chances are good as long as your inability to pay is a reasonable excuse.