Owing Money to the IRS: What to Do Next
Taxes are confusing and stressful for a lot of people. Owing money to the IRS just adds to that anxious feeling. If you find yourself in this situation, stay calm, and consider your options. It may not be as bad as you think, depending on how much money you owe. No matter how bad it is, no one can go to jail for being in tax debt in the United States.
Can’t pay taxes?
If the time comes to file your taxes and you don’t have enough money to pay them, don’t panic. You won’t necessarily end up owing money to the IRS. Make sure to file your return on time and pay as much as you can towards the total amount owed. Filing an extension is a good first step. This gives you more time to come up with the money. Once the time is up, you can then call the IRS to try to work out an additional payment extension or some other type of installment agreement. If you are just a little bit behind, this is probably your best route.
Owe the IRS a lot of money in back taxes?
A more serious situation would be owing money to the IRS over the course of several years. This can put you in serious debt and damage your credit. If this is the place you find yourself in, you should find yourself a tax expert or lawyer to help you through. Never meet with the IRS alone. Always have someone there who understands the lingo and can make sure everything is fair.
There are several different ways you can pay back your debt if you end up owing the IRS. First, you could get hardship suspension. This is when you don’t have to pay for a set period of time due to specific financial hardship you are facing. Be warned that interest continues to accrue during this time even though you are not paying.
Another option is to pay the money back in installed monthly payments. This functions like a regular bank loan, with you paying a set amount toward your tax debt each month. The IRS usually sets these up so that the entire debt is paid back in three years.
In some cases, you can compromise with the IRS in order to pay a lower amount than you owe. This is difficult to achieve and should never be attempted without an attorney. If the compromise works, you start fresh once your agreed-upon amount is paid.
One last option that also requires a lawyer is filing for bankruptcy. This may seem like an extreme step, but it can be helpful in some cases. There are two main types of bankruptcy. Under chapter 7, state and federal income taxes may be forgiven in some cases. Another outcome of filing for bankruptcy is a new repayment plan for the debt with little or no interest. This is done through chapter 13 bankruptcy. If you are considering filing for bankruptcy because of owing money to the IRS, consult a bankruptcy attorney that is also an expert in tax law.
Need help filing for bankruptcy?
If you owe the IRS and are thinking, “I need a bankruptcy attorney near me,” look no further than Bartifay Law Offices. They have been helping people through bankruptcy and foreclosure cases since 1993. Bartifay Law can help you figure out what type of bankruptcy to file for, how much you really have to pay, and more. Call (412) 824-4011 to schedule a free consultation.