When you have serious tax issues, you need someone who knows tax law

Tax debt and the IRS: 3 options for those who owe money

Uncle Sam is fierce when it comes to tax obligations. Taxpayers can fall behind on filing returns or, for business owners, making quarterly payments. Whatever the reason for the lapse, the Internal Revenue Service (IRS) is not known for waiting patiently for you to catch up on your tax obligations.

What will the IRS do if I do not pay my taxes?

The IRS has a myriad of legal tools it can use for those who fail to pay their tax obligations. If they can establish that you knew about your obligations and took actions to intentionally avoid making payments, they could push for criminal charges. Criminal tax evasion charges are serious and can include steep financial penalties as well as potential imprisonment.

The IRS can also take administrative action, filing a Notice of Tax Lien in the public record, seizing assets, and taking payment directly from your bank account on wages. They can even put a hold on your passport.

What if I cannot afford my tax bill?

Tax bills can quickly snowball into unmanageable amounts. Those who owe the IRS are wise to take action to control the situation. The bill will not go away. In fact, it will continue to grow as the feds add additional interest and penalties to the bill, even with payment plans and installment agreements. Options that can help you to gain some control over this situation include:

  • Payment plan. Taxpayers who owe up to $100,000 can use a short-term payment plan for up to 180 days.
  • Installment agreement. Those who cannot make payment within the 180-day deadline noted in the option above could consider an installment agreement. This option allows the taxpayer to make payments over a longer period of time.
  • Offer in compromise. This option allows the taxpayer to settle their tax bill with the IRS for less than actually owed. This requires the taxpayer file all necessary paperwork and establish that the offered amount is all that they can afford to pay.

The best option will depend on your specific situation. It is a good idea to seek legal guidance to help understand each option and better ensure you choose the one that fits your needs.