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So, What Happens If I Can’t Pay My Taxes?

It is not uncommon for taxpayers to ask us this question each filing season. What I don’t do is advise them to call those 1-888 numbers that you hear about on television to ask for “IRS debt relief.” It really isn’t that difficult to work with IRS on an installment payment arrangement.

For individuals, if you owe less than $50,000 in taxes, penalties, and interest, and you’re not delinquent in filing any tax returns, you can qualify for what IRS calls an online payment agreement. This is where we find most of our clients fall, but there is an even simpler way to do it when the stakes are lower. Here is what IRS says about it.

For instance, most of the time, we see clients who owe $5,000-$15,000 to IRS. We have developed an IRS letter template, which we advise clients to send in with their first payment (when the returns are filed), asking for an installment plan. I have yet to see IRS turn anyone down for monthly installment payments of amounts in that range. It’s a pretty simple process, one with which we are happy to assist if the circumstances call for our help.

Guys, this isn’t anything to be embarrassed about. There are times when the tax liability comes out of nowhere and you don’t have any other choice. And honestly, you can’t run away from it…IRS will find a way to extract from you what you owe. So, what can we help a client with in this case?

  • First, we assess what is owed.
  • Second, we help figure out what the client can pay monthly to IRS.
  • Lastly, we help with the preparation of the letter, and we advise the client to send the payments as promised.

Things to keep in mind:

  • Penalties and interest will apply to the unpaid balance for as long as you owe anything. It’s in your best interest to pay off the balance as soon as possible.
  • If you miss a payment, expect IRS to send you a nasty, threatening letter and ask for everything you owe them immediately. This WILL happen. It’s also in your best interest to keep up those monthly payments. If your memory isn’t the best, or you’re frequently called away on business and your life is just too hectic to remember that check each month, then set IRS up on monthly payments through their online payment system where it happens automatically. They’d much rather have automatic payments anyway since checks can get lost in the mail.

If you find that you’re in the position of owing IRS, and you can’t pay it right away, don’t fret. Don’t hide your face in shame. Let’s figure out a way to work with them, together.

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