Many taxpayers start working on their tax returns expecting to see a
refund coming their way only to find out that instead of a refund they
owe money to the IRS. In some cases, the amount of money owed can be
significant and overwhelming. In these cases, the taxes often go unfiled
and unpaid. While this may help you feel better in the short term, it’s
not a good long-term solution. As a taxpayer, you will always be
obligated to pay those back taxes.
If this sounds familiar, don’t fret. The tax experts at
Whyte & Associates in Rancho Cucamonga can help! Here, they offer
steps to help you pay off or resolve your tax bill with the IRS.
- Make sure the amount is right.
Whether you prepared the taxes yourself or took them to a professional,
mistakes can be made. Look over your tax return and make sure that
income isn’t counted twice, that all of the deductions are included, and
that everything is in the right spot. Also, be sure to compare your tax
return to the previous year. If your financial situation hasn’t
drastically changed, your taxes shouldn’t either.
- Minimize penalties and interest.
Look for exceptions to underpayment of tax penalties that might apply,
such as earning most of your income in the latter part of the year.
Also, you can ask the IRS for an abatement of penalties by writing a
letter to the IRS explaining your situation. Finally, pay the bill as
quickly as possible, even if it’s not the entire amount.
- Ask to pay in increments. It’s important not to
ignore your tax bill. In many cases the IRS will work with you to pay
the taxes off in three years.
- Offer in compromise. You’ve likely
seen advertisements for companies that promise to settle your tax bill
for less than you owe. While this is true in some circumstances, it
comes with a big price. Taxpayers who ask for an Offer in Compromise
(OIC) will have to offer at least as much as their net worth. Like
bankruptcy, this should be used only as a last resort.
- Do not put the bill on a high-interest credit card.
The IRS will charge you interest, but it is usually a far lower
interest rate than those that come with most credit cards. Additionally,
it’s not recommended to cash in a retirement account in order to pay
the taxes.
If you follow the rules, communicate effectively and are
straightforward with your accountant and the IRS, your back taxes don’t
have to be a big problem. Start by calling Whyte & Associates who
can help you get your paperwork in order.
