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It is one of the big fears a taxpayer may have, that they will one day receive a big bill from the IRS that they don’t have the money to pay. Some people’s gut reaction to getting bad news might be to ignore it and delay taking any action regarding it, so they don’t have to think about it. Also, some individuals might make the incorrect assumption that if they have a tax bill that they currently are unable to pay in full, they have no real options and thus it really doesn’t matter how they respond to the bill.
However, ignoring a tax bill can have very serious consequences. It could expose a person to growing interest and penalties. Also, it could cause their tax debt issue to grow into a much bigger problem with the Internal Revenue Service that could have significant ramifications for their finances and their future. So, taking prompt action to respond can be very important when a person receives a tax bill that they don’t have the funds to immediately pay off.
There are a range of options such a taxpayer may have for addressing their tax debt, including:
- Trying to reach an installment agreement with the IRS. Under such an agreement, a person can pay off a tax debt over time.
- Pursuing an offer in compromise with the IRS. An offer in compromise allows a person to settle a tax debt for less than the full amount.
- Using credit to pay off the debt.
Every taxpayer facing a big tax debt has their own particular circumstances, and these circumstances influence things like what options for addressing their debt they have and which options which would be consistent with their goals and overall financial well-being. So, an understanding of what options they have available in their situation and what the implications of each of these options would be can be critical pieces of information for a person to be equipped with when taking action in response to a big tax bill. Tax attorneys can provide taxpayers with this information and other key pieces of information, guidance and advice to help inform their decision-making when navigating a tax debt matter.
Source: Red Bluff Daily News, “IRS tips for taxpayers who owe taxes,” May 16, 2017