You receive the news many of us hate to hear – you owe the Internal Revenue Service (IRS)! So what should you do?
First Things First
Understanding why you owe is the first key to your success. Are there more deductions you can take?
If you are deemed to owe a balance due on a past tax return, have a tax professional or certified public accountant (CPA) to review your tax return for accuracy. Often, many deductions are overlooked, and as a result, the taxpayer may owe more than necessary. Also, certain penalties are waived if the taxpayer shows reasonable cause. It is also a good idea to review the prior three years of tax returns to determine whether the tax liability could be reduced or tax refund increased. This process could help offset any amounts currently due.
After you have reviewed your tax return and still unable to reduce your tax liability, there are payment options available to you.
The IRS will allow you to set up an installment agreement for balances less than $50,000. This installment agreement will enable individuals to pay a set amount monthly if you are not in a financial position to pay the entire amount. Keep in mind, there are fees associated with setting up an installment agreement. In addition, penalties and interest may still accrue during this period.
Pay Pennies on the Dollar
You hear it all the time in advertisements, but is it true? The IRS will allow you to settle your debt for pennies on the dollar, but you must qualify! Just as the name implies, you can offer the IRS an amount, and it will compromise the rest.
However, you must show that paying the debt would cause financial hardship, and you can’t afford to pay the full tax liability. You also have to prove your inability to pay through providing your financial information, such as the amount of income and current expenses. Also, you have to disclose your equity (subtract your liabilities from your assets). Need help? Contact our office today!
Remember your choice, your future!