It’s a nightmarish scenario to find yourself unable to pay the federal or state taxes that you owe. The thought of paying penalties or even facing jail time as a result of unpaid taxes or unfiled returns makes it all the worse, but there is IRS tax help and state tax help available. As soon as you know you will not be able to pay your tax liability in a timely fashion, you need to act, either by dealing with the IRS directly or by hiring an attorney, CPA or an enrolled agent to represent you in the matter.
There are a few different ways that you can work out an agreement with the IRS or your state tax authority to either pay what you owe or negotiate a settled arrangement for a lesser amount. The most common option for individuals who are unable to pay what they owe is to request an extension of time to pay. If your inability to pay your tax liability in full is simply a matter of time, than this is usually the best choice.
However, the amount that you owe could simply be too large for you to pay, even with additional time, without incurring serious hardship. If this is the case, then you may want to explore settling your tax debt with an Offer in Compromise. These arrangements require you to demonstrate that you are either genuinely unable to pay what you owe or that doing so would result in undue hardship. You must also not currently be involved in bankruptcy proceedings and meet other criteria to be eligible for this option; a CPA, attorney or enrolled agent who specializes in providing IRS tax help can assist you with this process.
You can do this on your own, but it’s much easier and often less costly in the long run to have a professional who is experienced in dealing with the IRS and state taxation agencies to handle things for you. They’ll be able to get together all of the necessary paperwork and make sure that it’s properly filed on time much more easily than you would, assuming that you’re not a tax attorney or CPA yourself. It’s also more likely that a professionally prepared Offer in Compromise will be accepted than one prepared by an individual taxpayer who is new to dealing with this kind of problem.
Another option available to you is to pay your back taxes in monthly installments. Generally, the payments will be spread out over one to three years, so except for those with exceptionally large amounts of unpaid back taxes, this is usually a good choice. You’ll have to pay interest on your unpaid taxes as well as some penalties (although these may sometimes be waived after filing an appeal with evidence that the penalties will cause you undue hardship, especially if you’re getting IRS or state tax help from a professional who can make an appeal on your behalf). It may not be an ideal situation, but you will be able to pay the taxes that you owe and even though it may be slightly more expensive, it’s certainly much better than living with the stress of an unpaid tax bill.
Have more questions? The Your Tax Clinic Team is more than happy to help! Call us now for a FREE Tax Solution Consultation (855)220-0770