I owe the IRS, what do I do?

So you owe the IRS, now what?

April 15^th has come and gone, but unfortunately for some people the issues with the IRS are just beginning.  If after filing your tax return you find yourself owing the IRS money it is time to look at your options. Before we discuss what can be done it is important to mention what should not be done.  Do not ignore the situation.  The IRS tends to be very reasonable to deal with, when you let them know what is going on.  If you are receiving notices and ignoring the situation you are simply going to make a bad situation worse.

Now for the options

1. Pay them- Sounds simple enough, if you owe the IRS a tax bill obviously you can simply pay them the amount.  Depending on your situation you may have some penalties and interest, however paying the balance in full is always a great option.
2. Request a short term extension- You or your tax professional can request a 6 month extension of time to pay the IRS.  This extension doesn’t stop interest and penalties but it does allow time to save the money and full pay the balance.  This is a great option if you are short on cash right now but will have the funds to pay in the near future.
3. Payment plan– If you don’t believe you can pay the full balance in the next 6 months the IRS will often allow you to do a payment arrangement.  You or your tax professional can contact the IRS and arrange payments over the next 3-5 years.
4. Currently Non Collectible Status (CNC)– Depending on your financial situation you may qualify for a status of currently non collectible.  This status exists to allow taxpayers in hardship to postpone collection activity until their financial situation improves. Contact your tax professional for more information and to see if you are a candidate.
5. Offer in Compromise- Depending on the amount you owe, your income and your assets it may make sense to discuss settling your debt with the IRS.  The IRS recently introduced the Fresh Start program designed to help taxpayers get a clean slate. This new program loosened the eligibility requirements for offers.  To find out if you are a candidate contact your tax professional.

Just remember, if you owe the IRS money there are options.  It is important to get in touch with the IRS or your tax professional early, don’t wait for the IRS to come to you.