If you owe IRS and can’t pay, what to do and not do
If you owe the IRS, how you decide to handle this debt could either soothe your anxiety or send you on an expensive journey that ends with more heartache than help.
So what should you do?
Let me share what Nina Olson, executive director of the Center for Taxpayer Rights, had to say. Olson, who formerly served as the independent national taxpayer advocate, has witnessed the financial calamity that can ensue when people who owe the IRS ignore the problem or seek refuge from pricey tax debt relief operations. The Taxpayer Advocate Service is an independent organization within the IRS that helps people resolve issues with the agency.
“I always tell people that the worst thing that they can do is nothing,” Olson said. “The IRS is not going to go away. It chugs along like a machine, and if you don’t respond to it, it will reach out to you in the form of levying your bank account or garnishing your paycheck.”
Here’s what Olson says you should and shouldn’t do if you owe the IRS.
Yes: Contact IRS
There is so much assistance online at irs.gov. Click the link that says “Make a Payment,” and you’ll find information about options if you can’t pay your tax bill . ... Prepare for a long wait for help on the phone when you call the agency’s 1040 toll-free line (800-829-1040) ....
There’s a good reason to confess your financial situation. The IRS will make a notation in your file that could put a hold on the more aggressive collection actions . ...
Also, be sure to file your return even if you can’t pay to avoid the penalty for failing to file.
No: Fall for a scam
You want a quick fix, so you consider calling the toll-free number for a company that says it has “skilled” agents who can make a deal with the IRS . ...
If you absolutely feel you can’t handle a collection issue on your own and need the services of a tax professional, do some research . ...
You don’t want to end up paying hundreds, if not thousands, of dollars to the firm for something you could have done yourself by going straight to the IRS. Or worse, the tax debt relief company is a scam.
Yes: Help at clinic
If your income is low enough, you could get free help from Low Income Taxpayer Clinics, which can represent you before the IRS in tax collection and other matters .... You can use the Low Income Taxpayer Clinic finder at taxpayeradvocate.irs.gov.
Yes: Payment plan
If you’re comfortable with doing things online, use the online payment plan application at irs.gov. You can set up a plan free or at a minimal cost ....
You can also apply for an “Offer in Compromise” (OIC), in which the IRS will settle a tax debt for less than the full amount owed . ...
No: Too-high payments
“My caution about using the (irs. gov) online tool is to see what the number is that comes up,” Olson said. “It may give you a number that is more than you can afford to pay. You don’t have to agree to that. But that means you have to go and talk to someone at the IRS.”
Once you reach a customer representative, you’ll be asked for additional information about your situation. Be sure to reveal all your financial challenges . ...
If you can’t pay anything, you can ask to be put in “Currently Not Collectible” status, recognition from the IRS you can’t afford to pay anything right now ....