No one wants to learn that they owe money to the IRS, but this could become your reality at some point in the future. If it does, the first thing you should do is keep calm. This isn’t a time to panic, as there are options available to you.
Once you come to grips with your situation, it’s time to determine the best way to proceed. Here are some of the options to consider:
- Installment plan: Also known as a payment plan, this is exactly what it sounds like. It allows you to repay your back taxes over a predetermined period of time. Although you’ll pay interest and penalties, it’s often the quickest way to get the IRS off your back.
- Offer in compromise: Not everyone is eligible for an offer in compromise, but it’s something you should at least consider. If the IRS accepts your offer, you’re able to settle your tax debt for less than what you actually owe.
- Lump sum payment: Once you have a clear idea of exactly how much you owe, you have the option to make a lump sum payment. For example, if you owe $10,000, you can send a check to the IRS for that amount, which will quickly resolve your issue. The problem with this is that you may not have the money necessary to make a one-time payment. And even if you do, you may not want to part with it.
- Take out a loan: No one wants to owe money to the IRS. You may feel more comfortable dealing with a lender or credit card company. And for that reason, consider the option of borrowing money, such as a personal loan, to pay the IRS. Doing so may also allow you to save money, depending on the terms and conditions of the loan you qualify for.
You do your best to ensure that you never owe the IRS money, but you could find yourself in this position at some point down the road.
No matter how much you owe, carefully review your situation and then consider the next steps in the process. You want to settle on the strategy that’s best for you, your tax situation and your finances.