Cutting Costs on Your Tax Bill: How to Save Money When You Owe the IRS
When it comes to saving money where your taxes are concerned, avoiding issues with the IRS is key. This means filing your taxes properly, filing them on time, and paying your taxes time, whenever you owe a balance. Neglecting any of these responsibilities automatically places you at risk for various fees and fines, and under extreme circumstances, even possible jail time. As soon as the IRS discovers where and when you dropped the ball, you may end up owing significantly more than you originally owed.
Preventing Further Debt with the IRS
Not everyone is fortunate enough to receive a refund when tax season rolls around. Maybe you, like many individuals, end up owing the IRS, instead of receiving a nice refund check each year. Whatever the case, being proactive and taking preventative steps to avoid tax debt or manage existing tax debt will save you money—and a lot of hassle—in the long run. Consider the following ways to eliminate or minimize potential fees and fines and ultimately save yourself a lot of money when you owe a debt to the IRS:
- Request a Short-Term Extension: If you can pay your balance in 120 days or less, you may qualify for a short-term extension. This allows you more time to pay the balance without racking up months and months worth of interest and late fees.
- Have More Taxes Withheld From Your Paycheck: By changing your withholding or estimated tax, you may eliminate any future balances with the IRS. You can do this by updating a Form W-4 with your employer, requesting that they take more taxes out of each paycheck. This way you owe less when return season arrives.
- Consider a Monthly Payment Plan: If a short-term extension still does not give you enough time to pay your balance in full and it is too late to change your withholding information on your W-4, the IRS also gives taxpayers the option to sign up for an installment agreement. This agreement breaks down the balance into monthly payments for you over a period of time. This option costs a small fee, and you may accumulate interest. Still, the sooner you pay and the more you pay each installment period, the less you will pay in the long run. If you owe $50,000 or less, an installment plan may be the best option for you.
- Request an Offer in Compromise: If all else fails and you are unable to pay your debt to the IRS, consider requesting an OIC, which allows you to settle your tax debt for less than the total amount you owe. To see if you qualify and to find out what the IRS would consider a reasonable offer, use the OIC Pre-Qualifier tool.
Exploring all your different IRS debt management options can be a chore, but working alongside a qualified Cook County IRS issues lawyer can give you the guidance and resources you need to identify the best route for your needs. Call the Law Offices of Eric G. Zelazny at 708-888-2299 for a personal consultation today.