When you have tax debt to handle, it can be a scary proposition for your personal and financial life.
No one wants trouble with the IRS, so it’s important that you face this situation head-on. Thankfully, there are financial aid options in place that can help you pay back taxes that you owe to the IRS.
Consider this information below so that you can get the financial aid arrangements that you need.
How to Handle Your Taxes Head-On
The best course of action when you’re trying to address your taxes is making sure that you meet the deadline and get them done professionally. Following the words of advice below will help you stay up to date and out of tax debt:
1. File Your Taxes On-Time
Each year, your taxes are due on April 15 or the next weekday if it falls on a weekend.
As soon as the new year rolls around, you need to begin thinking about how you’re going to handle your taxes this year. In fact, though the deadline is in April, you owe it to yourself to file as quickly as you can.
You’ll have to pay some tax preparation costs to be sure they’re done correctly and on time with the help of a professional, but it’s worth every penny. This is especially advantageous if you’re expecting a refund this year and want to be sure that it’s processed in a timely manner.
2. Do Your Best to Pay Some of Your Tax Bill Down
Even if you can’t afford to pay your entire tax bill all at once, make sure that you make a payment in advance.
This is not only a show of good faith for the IRS, but it’ll also make any installment agreement terms more advantageous for you. Keep a copy of your payment so that you have it at your disposal once you seek some form of financial aid.
3. CPA Assistance
You can always count on accuracy when you choose to get the help of a certified public accountant (CPA) that can handle your taxes for you.
Hiring a professional will help you get your return filed as quickly as possible, and they understand tax law well enough to help you maximize your refund. They understand the nuances of taxes and can help you find deductions that you didn’t know were possible.
As such, hiring the help of a tax professional is useful to you whether you are an individual, married filing jointly, or a person with several business interests that need to be addressed.
Can I Get Financial Aid For My Taxes?
OK, you’ve filed your taxes and know how much you owe. Now what?
Thankfully, there are plenty of financial aid options you can look into that will be useful to you. A tax consultant can help you figure out your options for financial aid.
Let’s take a look at some of the best financial aid options available.
Set Up an Installment Agreement For Your Taxes
The IRS offers installment agreements for people looking to pay down their tax debt on a month-by-month basis. With these agreements, the IRS considers your entire tax bill and then issues you a monthly payment plan that will help you pay your taxes little by little.
Let’s take a look some of the things you need to know about finding an installment agreement plan:
1. Determine What Can Afford To Pay Each Month
First off, you need to determine what monthly payment you can afford. Rather than just thinking about your taxes, you will also want to consider how much you pay toward your rent or mortgage, your average utility bills, and what sort of income you’re bringing in.
Since this payment plan is in place for the foreseeable future and until your tax bill is paid off, also consider your future income and any sort of life changes that might occur.
Your monthly payment plan is something that you should be able to pay with no problem, so always ask for an amount that won’t break the bank.
2. Fill Out an Application For an Installment Agreement After Filing
Once you’ve gone over your budget and decided how much you can afford per month, you’ll want to visit the IRS’ site and fill out your installment agreement application.
When you complete your application, you’ll start with the monthly payment amount you are requesting and will need to give information about your job, wages, and bank info.
From there, the IRS will either accept or deny your application based on a number of factors.
3. Sign the IRS’ Offer & Create the Agreement
Once your application is approved, the IRS will either accept the monthly payment amount that you requested or will issue you a minimum payment amount that they’ll allow.
The plan doesn’t go into effect until you sign it, so read through every detail and make sure it is a plan that you can afford. From there, you’ll be responsible for handling every payment each month.
4. Find a Payment Vendor
While the IRS offers financial aid in the form of an installment agreement, they don’t take payments directly.
Instead, you will have to sign up for service through an outside payment vendor. Only use the outside vendors issued on the IRS’ website, since those are trusted and verified.
From there, you can research the fees and make sure that they are fair and affordable.
5. Set the Date and Follow Your Installment Agreement
Be sure that you also set a payment date that works for you each month.
The easiest way to address your installment agreement is to get the money automatically taken out of your account. Setting up an automatic withdrawal from your debit card or checking account makes this plan simple for you while letting you pay down your tax debt.
Create an Offer in Compromise
An offer in compromise (OIC) is yet another form of tax-related financial aid.
With one of these offers, you are requesting a settlement with the IRS at an amount that is less than your tax debt. This can be a great way to save money while addressing your taxes.
Consider the following info to seek an offer in compromise:
1. Ensure All Tax Return Filings are Up-to-Date
Before approaching the IRS with an offer in compromise, you need to be certain that all of your taxes are filed and up to date.
They will look into the total amount of money that you owe and give you a dollar amount that they feel is best for both parties. These plans are particularly advantageous when your tax bill has gotten out of hand and you don’t feel that you can afford it.
In these situations, the IRS would rather take some form of payment than hound you forever for money that they won’t likely receive.
2. Reasons For Seeking an Offer in Compromise
When you apply for an offer in compromise, you’ll need to explain to the IRS why you were late.
This could be due to anything from loss of a job to life events that create unforeseen hardship. Regardless, be ready to explain these matters in detail, rather than simply filling out an application and assuming that it will be accepted.
3. Get 3 Months of Documentation in Order
In addition to having your reasons lined up, you will also need to have your documentation in order.
As a rule of thumb, you’ll need to make sure that you have 3 months of financial information, to include things like bank statements, proof of income and bills. Be as thorough as possible during this period so that you don’t run the risk of having your application denied or delayed.
4. Use the IRS’ Pre-Qualifier Tool
The IRS’ pre-qualifier tool can be your best friend if you’re trying to apply for an offer in compromise.
With this trusty tool, you will get a clear idea about whether the offer in compromise is a viable option for you or not. It lets you fill in information related to your tax debt and finances so that you can seek pre-qualification, and then move forward with your application without a doubt if this is the strategy that you’d like to employ.
5. File The Application and Follow Up
After pre-qualification, you’re well on your way toward getting the financial aid that you need in the form of an offer in compromise.
Be detailed with your application and don’t hesitate to follow up until you get an answer. You’ll be given a timetable of some dates, and the IRS will schedule a preliminary phone conversation as your application moves forward.
Petition the IRS For More Time to Pay
Sometimes, the best form of financial aid for your taxes is simply to ask for more time. Thankfully, this is a common course of action that many people take.
Here’s what you need to know:
1. File Your Taxes
Even if you know you’re going to need more time to pay, file your taxes anyway.
Many people who know they’re going to come up short on funds make the mistake of also postponing their filing. Your chances of receiving a delayed deadline increase when you get your taxes on the record.
2. Contact the IRS to Let Them Know What’s Going On
In addition to filing your taxes, touch base with the IRS after filing and let them know you are going to request an extension. By getting this sort of correspondence on file, you are more likely to have this request approved.
3. File For an Extension & Honor It
After you ask the IRS for an extension so that you can pay after the deadline, make sure that you honor it.
The extension might get approved automatically online, or the IRS might reach out to you to request more information. Be prepared for a followup just in case.
Seek a Loan to Handle Your Tax Debt
You can also get a loan to address any tax debt that you have. Make sure that you get your credit in order first so that you can get the best loan rates.
Pull a recent report for your credit score so that you know how much of a loan you can get, and what sorts of interest rates. Decide on what type of loan you want and whether you need collateral.
Reach out to several financial institutions to make sure you’re getting affordable rates from lenders that are credible. You’ll need to get your documentation together so that you can apply for the loan on your terms.
Further, pay off your tax debt immediately once your loan is approved and the money clears.
In the meantime, start thinking about hiring the help of tax professionals that can help you stay out of tax debt. You might need to hire the help of a tax lawyer if you’re dealing with any sorts of issues.
Tax professionals can also help you stay on top of tax law changes that happen year in and year out.
Pay Back Taxes On Your Terms
When you need to pay back taxes on your terms, these are the points that you need to keep in mind. Follow these tips to get any help you need with your taxes.
To learn more about what we offer and how we can help you, schedule a free consultation for our tax service today.