You Owe the IRS Money -- Now What?
NEW YORK ( MainStreet) If you're putting off filing your tax return because you owe the IRS, you're not alone. However, you probably don't have to be as afraid as you might think. The days of the soulless IRS representative inattentive to your pleas are long gone. In fact, the IRS has one of the best customer service departments out there and, depending on what you owe, the IRS can be one of the best creditors that you have. Here's what you need to know if you're looking at a tax bill this year.
You Need to Communicate
Charles Thybulle, an assistant vice president and financial empowerment manager at Fifth Third Bank, notes that communicating with the IRS is the most important first step. Most people will qualify for an automatic payment plan, but you need to at least fill out the required paperwork.
Guidelines for Repayment
Michael Rozbruch specializes in helping people in big trouble with the IRS. He also doesn't take cases that are less than $15,000. What this means is that if you owe less than that, your case isn't even significant enough to warrant external assistance. You're like most people who owe. And, Rozbruch points out, if you owe less than $10,000, are up to date on your filing and can pay off the total within 36 months, you automatically qualify for a repayment plan. "Even if they owe up to $25,000, people can still get a repayment plan over 72 months," he says. You'll still want to pay it off as quickly as possible to prevent interest and penalties from piling up.
Is It Time to Negotiate?
Thybulle points out that negotiation should always be on your mind. "If you're unwilling to have that conversation, you're defeating yourself," he says. Still, remember that Rozbruch will only take cases where someone owes more than $15,000. This is because, while you might have some wiggle room for negotiation, there's not much that you're going to save after he tacks on his fees.
"The average client that we take owes $45,000," he says. "We can maybe get that down to $10,000, including our fees," he says. The process of negotiating, however, can be very intrusive. "Once you hit $50,000, you're really in the big leagues," he says. "The IRS is going to want to know where all your assets are so that they can go after them in the event that you default on your payments."
What Do To After You Have a Plan
Once you have a payment plan in place, it's simple: start making all your payments on time. If you fail to do so, the IRS can revoke your payment plan. This is why it's best to go for low installment payments, but try and pay the most that you can every time you send that monthly check in.