Dealing With Federal Tax Debt
Many Americans eventually run into a problem in paying their federal taxes when they’re due. It can be because they didn’t have enough money taken out during the year or didn’t pay enough estimated tax, or even had the IRS discover that there was an error in figuring out amounts and finding that one suddenly owes a lot of money to the government. For that matter if you’re unemployed when it’s time to make payment you’re not going to give up food money to pay your taxes; that’s just how life works.
Believe it or not, the federal government is one of the easiest groups to work with when it comes to getting assistance in setting up payment arrangements or even getting a reduction on how much you’ll actually have to pay them. What it takes from you is overcoming the fear of the government, picking up the phone, and making the call.
The people who work for the IRS are easy to work with. They employ great customer service processes, as they know that many people are scared of them unnecessarily. They also realize it’s not their money and that if you’ve taken the first step by calling them instead of waiting for a series of dunning letters that you’ve shown great bravery and are ready to own up to your responsibility.
The first thing you have to do is either agree with the amount they say you owe or dispute it. No deal with start if you dispute the tax until they’ve investigated everything and sent you a letter, but you have to have a good reason for disputing the balance. It might be higher than you expected it to be because of interest and penalties; there’s nothing you can do about that for the moment.
Once you’ve come to grips with the fact that you owe the money, it’s time to set up a payment agreement. As long as your tax liability is less than $25,000, they are willing to work with you on some kind of monthly payment amount. Don’t try making them look bad by offering to pay $10 a month on a high balance; they always have the right to demand that you pay it all in full, and they will garnishee your wages.
Make a good faith effort in determining how much you hope you can pay them on a monthly basis, and then make sure you make that payment monthly, on time. If your income changes and you need to lower the amount, you can always call them and make adjustments. Any time you can pay more, that’s always accepted.
When you set up a payment arrangement, you’ll get a monthly letter from them indicating how much you have to pay and how much tax, interest and penalties you still owe. If you’ve paid off the taxes and still have a balance due to interest and penalties, you can call the IRS and ask them if there’s something they can do for you.
If you’ve consistently paid them without missing a payment, they’ll wipe out the penalties, which is pretty nice of them. I’ve never heard of them wiping out interest, but it doesn’t hurt to ask if they have any leverage on lowering it.