Don’t panic if you discover you’ve made a mistake on your taxes and the IRS is now sending you collection letters and calling your house. You can’t dodge your obligation for long, sooner or later you will have to make a payment arrangement with the IRS, but you can clear this debt off of your plate and out of your budget.
When faced with an IRS bill, and if you find you can’t pay the bill in 120 days or fewer, you will need to work with the IRS to get the debt taken care of. There are several types of payment and installment plans you can work out with the IRS. Remember, however, that no matter which plan you come up missed payments will bring the IRS asking for the full and immediate payment. Don’t agree to a payment plan that you won’t be able to adhere to.
You will first need to discover from the IRS whether you qualify (income-wise) for an installment agreement to pay off your tax obligations. Even under an installment plan, taxes and penalties will still accrue but at a lower rate in some instances. You may need to consider taking out a bank loan to cover your IRS debt obligation because paying off the IRS as compared to a bank loan may save you money in the long run. Carefully compare the benefits and interest rates that will be charged by any entity in which you get a loan from.
Truly, paying the IRS in full is the best option but it simply might not be an option if you’re unable to secure a loan from another source. In some cases, individuals opt to put their taxes on a credit card an option. Interest rates on credit cards, however, are typically higher than what the IRS will charge. Yet some people simply feel that getting the IRS off their back is the way to go and will take the higher interest in order to be free of the IRS.
Keep in mind that when you’re filing your taxes and find that you can’t make the whole payment that is owed, you will have up to 90 days before the IRS will typically come knocking. Make certain that even if you don’t’ have the full amount that you owe available that you still mail in a partial payment as a gesture of good will.
So don’t start to panic when the IRS calls. Be proactive and timely in resolving your taxes, and you’ll find yourself debt free in no time.