Options for Those Struggling to Pay Their Taxes

Feb 03, 2024 By Triston Martin

Completing the process may be enjoyable if you expect a tax refund. But if you think you could owe the IRS money you don't have, it might not be easy to get started. It is preferable to have a tax bill in hand that you are familiar with rather than one that you aren't. Putting your Struggling to Pay Their Taxes bill in a drawer and ignoring it won't make it go away, like most other problems.

Providing Help with Taxes and Giving Advice

It is feasible to receive assistance if filing your taxes is a significant strain. Volunteer Income Tax Assistance and Tax Counseling for the Elderly are only two government initiatives providing free tax preparation services to eligible persons. Several software companies offer a free version of their product for people with straightforward tax returns. The Internal Revenue Service (IRS) also has a free file application for those who qualify.

Take what you can afford.

If you can't reach the deadline but still want to file on time, you should file an extension. You'll get more time to submit your tax return (but not more time to pay your bill) if you file for an extension, but you'll face stiffer penalties if you don't.

The Internal Revenue Service will add interest to any unpaid tax debts. Even if you can't afford to pay your entire tax bill right now, even a tiny payment will reduce the interest you'll have to pay in the future.

Think about setting up a payment plan with the IRS.

You might get more time to pay back the taxes you owe by entering into an installment agreement with the Internal Revenue Service (IRS).

Certified public accountant and proprietor of RainCity CPA in Seattle, Jordie V. Neth, says monthly payments cannot be renegotiated once they have been established. You can spread the cost out over [up to] 72 months, as per the IRS's approval. You can always pay more if you go that route, but you'll never pay less, as Neth puts it.

Not Paying Your Bills On Time

Neth suggests spreading your payments over the longest possible time frame to ensure you pay the least likely overall. In this approach, Interest and other additional fees may be assessed if you opt for a payment plan. Depending on the length of your payment plan and whether or not you apply online, you may also be required to pay a processing cost for using a debit or credit card and a setup fee.

Send in a request for a negotiated settlement.

To reduce or eliminate tax debt, you might submit an offer in compromise. A certified public accountant in Chambersburg, Pennsylvania, Tina Pittman, owner of Your Accountant, says that one of the main advantages of an offer in compromise is that you will pay less than what you owe. According to Pittman, making an offer in compromise can help you avoid IRS collection calls and letters.

A Cash Payment Made In The Beginning

Bear in mind that the IRS usually denies offers in compromise. Your first payment will probably go toward paying down the debt. In exceptional cases, we can return your application money.

You may not have to pay the application fee or the down payment if you are eligible for low-income status. Furthermore, while your offer is being considered, you won't have to make any monthly payments.

Try to get a "currently not collectible" label on your account.

Those unable to pay their taxes can request that the Internal Revenue Service treat them as "currently not collectible." If your financial condition improves, the IRS may temporarily put off collecting from you. Remember that this is merely a label the IRS is applying temporarily to your account and that you will still need to pay your tax debt at some point in the future. (During this time, the IRS may still seek a lien against you.)

Those who wish to be considered "currently not collectible" must submit financial details, including their assets, income, and monthly costs.

If you can, seek the advice of an expert.

If you have any tax issues, Pittman says you should see an expert before contacting the IRS. People must learn that they have choices while dealing with the Internal Revenue Service. They take for granted that the only document you have is the installment agreement, for which you are responsible for paying late fees and interest.

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