No matter how nice it would be, you have no choice but to pay your taxes. This includes federal, state and local, among other types, such as if you’re a business owner.
When you stay current, you never have to concern yourself with owing money to the IRS or another tax agency. However, should you slip behind, you could find yourself buried in tax debt and looking for the best way out.
As you seek relief, there’s one thing you need to know: You should always file your taxes, even if you don’t have the money on hand to pay what you owe. Neglecting to do so will only make things worse, as you can face additional penalties.
You always have the option to request an extension if you need more time to file your return with the IRS. It won’t do anything in regard to what you owe, but it at least gives you additional time to get organized.
Note: Even if you file an extension, you should still attempt to pay as much of your estimated amount due before the April deadline.
Once you know how much you owe, you have a few options:
- Pay it in full: By doing this, you get back to even and eliminate any possibility of the IRS charging interest and penalties. It’ll also give you peace of mind.
- Request a payment plan: If you don’t have the money to pay in full, request a payment plan for the amount you can’t pay. Formally known as an installment agreement, this is the best option if you don’t think you’ll be able to pay the balance within 120 days.
- Consider an office in compromise: This doesn’t work for everyone, as the IRS loses out in the end. However, it’s something to consider if you can clearly prove to the IRS that paying your back taxes will cause extreme financial hardship. With an offer in compromise, you request to pay less than what you owe, with the remaining amount cleared from your account.
Any amount of tax debt is sure to scare you, as you know how serious the IRS is about collecting. If you find yourself in this situation, learn more about your options for relief and legal rights.