It’s never any fun having to deal with debt,but it must be done. Dealing with the IRS when you owe back taxes,however,does not have to be painful. If you take the right approach,it can be as simple as paying off a small credit card or settling with a medical creditor.
Here are some tips to keep in mind when dealing with the IRS when you owe back taxes:
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Even the IRS points out the best strategy- Pay as much of your tax bill as you can,even if you can’t pay it all at once. This minimizes penalties and interest. So,whenever you get a bill from the IRS,try to put as much as you can toward the total.
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Use the new IRS free payment tool called Direct Pay when you do pay them anything. There’s no longer a need to go through a third party paying platform. That won’t save you a ton of money,but if you make monthly payments to the IRS,it will save you about $5 each time you use the free tool.
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Remember the “magic number”: 800 829 1040. That’s the IRS phone number where you can apply for an extension to pay. They’ll typically give you up to 120 days to pay in full,and there’s no set-up fee or hassle. Millions of taxpayers use this program each year to pay off their entire tax bill with the 4-month extension.
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If you are dealing with the IRS when you owe back taxes,consider a payment agreement. Visit IRS.gov to fill one out and if you owe less than $50,000,you will likely be approved for a monthly payment plan. Most plans run for about three years. You’ll still be paying interest and penalties on the unpaid amount,but this program is one of the Agency’s most popular payment plans for people who need more than the 4-month extension.
Follow the above tips,and you’ll have much less of a hassle when tax time comes around.