The IRS expects you to pay your tax bill each year. When this year's debt is more than you can pay, you might wonder how you can settle it without having a lien put on your assets or having a garnishment put on your paycheck. You can pay your tax bill quickly and realistically by following the process of setting up an installment agreement with the IRS.
An Agreement Based on Your Tax Bill
The type of installment agreement you pursue should reflect how much you owe the IRS. If you owe less than $50,000 including the actual debt itself along with fees and penalties, you can ask for a relatively straightforward plan that lets you make payments based on your total household income.
To get set up on this type of payment plan, you must fill out IRS Form 9465, which is found on IRS.gov. The IRS accepts payments in the form of:
- money order
- personal check
- credit card
- debit card
- automatic bank withdraw
If you owe more than $50,000, you will be legally obligated to disclose what kinds of income and assets you have at your disposal to settle your debt. Before you can be set up on a payment arrangement, you must inform the IRS about assets like:
- real estate
- lines of credit
- bank accounts
that could be liquidated if need be to settle what you owe the government. Once the IRS determines what if any of your assets can be sold, you will be allowed to make payments on the debt after the liquidated values are applied.
Other Payment Options
An installment agreement can protect your income and assets and let you settle your IRS bill progressively over time. Still, it requires that you remain actively engaged with the IRS and under the obligation of disclosing any raises in income or obtainment of assets until the debt is paid in full.
When you wonder what other options you have to deal with what you owe in taxes, you may consider taking advantage of other methods to settle the obligation. For example, you may apply for an Offer in Compromise, or OIC.
You may be approved for an OIC if you have a limited income and little means to pay the amount in full anytime soon. This option essentially lets you settle the debt for less than what you owe. The offer you make must be realistic and in line with how much you earn and what kinds of assets if any that you can sell and apply to the amount.
If you do have the means to pay your tax bill, you are generally advised to do so even if it means that you will temporarily be financially strained. Alternatively, the IRS will allow you to pay your debt using a credit card, which might be an option if you want to avoid the fees, interest, and penalties that come with making monthly payments to the IRS directly.
Finally, if you are unsure of what option to choose or you have questions about how to engage the IRS effectively when addressing your tax bill, you should retain the services of a tax professional. A tax pro knows the options well and can guide you in making a decision that protects you, your family, and your finances.
When you owe the IRS instead of expecting a refund, you do not have to go bankrupt to pay off the amount. You can settle what you owe affordably and realistically by requesting an installment agreement or another payment option available to taxpayers today.