Dealing With The IRS When You Owe Them Money

Millions of Americans get a tax rebate from the IRS each year. For those families, it is a great bonus to receive money that they thought they had paid in tax. You might not be as lucky. For every family that gets a refund, there is a family that gets a strongly worded letter. The letter details how you owe money to the Internal Revenue Service, which isn’t a good prospect. In fact, it is a pretty bad one because they have the authority to pull the rug from under your feet. Owing the IRS money isn’t where you want to be, but it is your reality.

Instead of feeling sorry for yourself, you can figure out how you are going to rectify the situation. Just because you need to pay more tax doesn’t mean that your life is over. Okay, it isn’t going in the right direction at the moment, but that will all change. The key is to find out how to pay back the money without putting your family in a difficult financial position. To do that, you need to know the tricks of the trade.

Get A Loan

As soon as you receive a notification, you are expected to pay in a timely fashion. The only problem is that you might not have the cash. Tax bills aren’t always cheap, and you will have budgeted for your tax bill already. If you don’t have the money, you might want to consider taking out a loan. It sounds drastic, yet people in your position believe it is better to owe the bank than the government. When it comes to tax, the government is very strict. At least with a loan, you will have them off your back as well as the prospect of jail. Also, certain lenders are pretty reasonable. A credit card company, for example, might offer you an incentive that makes the loan less formidable.

Ask For More Time

Securing a loan depends on your financial situation. No one is pointing fingers, but your finances aren’t going to be amazing. Otherwise, you wouldn’t owe the taxman a lot of cash. If that is the case, you will struggle to get a loan as they won’t lend to someone with bad credit. Your only option then is to find more money or to ask for more time to pay. Money doesn’t grow on trees, so finding an extra revenue stream won’t be easy. The IRS might provide you with an extension on your deadline if you fit certain criteria. The criteria revolve around you showing them you will pay them back in the future. As such, a gesture of goodwill is always a good idea.

Pay With A Credit Card

Thank God for credit cards! Use them poorly and they will bite you on the ass. Use them wisely and they will get you out of a tight spot. The line between the two is minimal. But, you don’t have to worry about that with www.getrichslowly.org. The website will show you how to use your credit card to maximum effect. The reason a credit card is a good idea is that the rates are usually lower. The IRS imposes a hefty rate of interest as well as any penalties that occur. Credit cards, although it sounds impossible, are much more interest-friendly. Thankfully, the IRS realizes that and lets you use a card as a payment option.

Look For Bad Credit Specialists

Paying with a credit card or a loan might not be on the cards if you have bad credit. Lenders don’t like taking a risk, which is why they only lend to people with a good track record. Although the conventional options might not be an option, there are unconventional ones. The main one is dealing with a bad credit lender. Life is full of people that are looking to carve out a niche for themselves, and this is where these lenders come into play. They see the sense in lending to people like you as the demand is always high. What you have to watch out for is that they are a legitimate supplier and not a loan shark. Loan sharks don’t play by the rules, and they will use physical violence if you don’t make the repayments. A credit union, for example, is such a lender. They only deal in small loans, yet they are more flexible and charge less interest.

Hire A Lawyer

What is a lawyer going to do in this position? The answer is a great deal if the lawyer is any good at his/her job. The law is complex and diverse, and there is more to it than defending criminals in court. Yes, criminal law is a feature of the law, but it is only one feature. Fortunately for you, there are hundreds of them, one of them being tax law. Take one look at www.AlexanderLawFirmLLC.com/boston and you will understand everything. A tax lawyer is a specialist that deals with tax debts and relieving tax arrears. A good one will never say that they will one-hundred percent fix your problems – that isn’t always possible. But, they will do their best to find you a compromise that suits both parties. For the most part, that is enough for you and the IRS. With their skill and experience, they will guide you through the process. It is always a good idea to hire professional help than to do it alone.

Installment Agreement

Before you start hiring lawyers and taking out loans, you should try securing an installment agreement. An installment agreement is where you agree to pay back the IRS in small installments each month. It is like most debt agreements, instead you owe the government this time. For that reason, the terms of the deal might not be as kind. After all, they don’t have to come to an agreement at all because they can put you in jail for not paying your taxes. As a result, they will want you to pay more money than a private dealer would require. Still, it is a better option than suffocating in debt or not paying it back. As long as you can scrape the money together, they will get off of your back.

Fill Out A Form

An installment agreement is only available to those that owe less than $25,000. Those that owe more will have to file a petition with the IRS. Either way, you need to fill out a form to get your agreement in writing. If you owe less than $25,000, send off a 9465 form to the IRS. If you owe more, fill out a 433F and send it to the same place. All you can do then is to wait for an answer. When you get it, you will know whether you have the agreement in place.

Minimize Penalties And Interest

The fact that you owe them money isn’t enough because they add interest and penalties on for good measure. Obviously, that increases the total bill and makes paying it off even harder. What you want to do is avoid these extra fines, but how? The trick is to try and offset this year’s tax with last years. If you underpaid this year but paid less last year, you won’t pay a charge. That is to say, you won’t pay a charge if you contribute as much as last year. You also have to pay that amount by the due date. Alternatively, the IRS can waive the charges. Write to them and tell them why you underpaid and they will respond. They might be kind if you had an unusual tax event or made an honest mistake. The final option is to pay as quickly as possible, but that isn’t an option if you don’t have the money.

Challenge The Amount

You can challenge the payment and try and decrease the amount. The lucky ones might not even have to pay a penny. But, before you get all excited, it is a long shot. As far as long shots go, in fact, it is the longest of them all. The IRS won’t take kindly to your request. In simple terms, they will laugh you out of the building. They know they have all the power, and they know that no one will overturn their decision. That includes the court and a federal judge. Unless you have irrefutable evidence, this is not likely to happen. With that in mind, make sure you have some solid evidence before you question their sums. Otherwise, you will only make them angrier, and that isn’t advisable. You might even make them realize that you owe more, which is the worst case scenario.

Offer In Compromise

An OIC is the last solution that you have at your disposal. It isn’t a very nice one, but it is an option nonetheless. In simple terms, an OIC means you have to offer them at least as much as your net worth. Your net worth is everything you own minus your debts. Think of it like bankruptcy – you only use it when you have no other cards to play.

Hopefully, you don’t have to deal with the IRS in this capacity. If you do, the above will come in handy.

About Peter Christopher

Peter Christopher is the Editor to Finance care Guide and a guest columnist for many blogs that deals with financial issues. He has devoted himself to full time speaking, writing and consulting on personal finance management. Visit him on Google Plus and Twitter.