Do you owe more taxes than you can pay?
Staying afloat financially can be challenging enough without the added burden of tax debt. You already have a mortgage to deal with, credit card bills to pay off, groceries to buy, car repairs to make and a host of other expenses to think about. With all that, paying the full amount you owe to the IRS may simply be impossible.
So what can you do?
The good news is that you may have several different options for dealing with back taxes. One of these options is to set up a payment plan. Here are a few questions and answers about such payment plans:
How can a payment plan help me?
According to the IRS, paying a little bit each month can have many benefits. One, you don’t have to pay the whole amount you owe immediately. You can spread it out over time. Two, you can reduce or completely avoid penalties and interest (as long as you pay off the debt). Three, you can stop worrying about threatening letters or wage garnishment, because you will have an acceptable agreement in place.
Do I qualify for such a plan?
You may quality for an online payment plan if you meet certain criteria, such as owing no more than $50,000 (for individuals) or $25,000 (for businesses). If your tax debt exceeds that amount, you can still pay in installments – it just won’t be online.
One important thing to note, however, is that you must file all necessary tax returns before applying for any type of payment plan. If you don’t, your application won’t be accepted.
Is a payment plan better than an Offer in Compromise or another solution?
The tax debt solution that is right for you depends on many different factors, including the amount of the debt, your financial picture and your long-term goals. For specific advice tailored to your unique situation, consider consulting a lawyer who has in-depth experience in tax law.