Tuesday, September 15, 2015

Dealing with Tax Debt

Upon receiving a note from the Internal Revenue Service (IRS) saying you owe taxes, you have different options on how to settle the debt.

Paying the Debt

Tax debt needs to be settled as quickly as possible because it will accumulate penalties and interests and would become harder to pay as the clock ticks. If you have enough money to pay the owed amount, you can simply pay it.

If you don’t have enough money, you have several other options but be aware that each has its drawbacks. For example, the IRS accepts payments via major credit cards. This is a convenient option as you can pay without leaving your home, but financial experts don’t recommend it. You pay a convenience fee, may end up paying interests, and be viewed by the issuer as a credit risk.

If You Can’t Pay

If you’re short on cash or paying the whole amount would cripple you financially, you can file a request with the IRS to settle the debt for a smaller amount than the whole debt (plus penalties and interests) or to settle it in a more manageable arrangement. Some examples are Offer in Compromise, installment agreements, and penalty relief. It’s advisable to get assistance from a tax attorney to have the best chances of approval.

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