Tax Relief Options: What To Do If You Can't Pay Your Bill

Tax season happens every year. For most it is annoying chore that must be done. Many look forward to a refund, a sort of forced savings plan they can use to pay off Christmas bills, but some find themselves staring at a tax bill. If it isn’t large, a simple trip to irs.gov/payments and or the state equivalent makes paying the bill fast and easy. If a taxpayer can't afford to pay in full, there are options. The first step is to recognize this is a common occurrence that must be dealt with sooner rather than later. The worst thing one can do is ignore the bill. The IRS offers several programs to help taxpayers manage what they owe without falling into deeper financial trouble.

File Your Tax Return Anyway

Even if paying the full amount isn’t an option, always file the tax return on time (or request an extension). This helps to avoid the Failure-to-File Penalty, which is typically much more severe than the Failure-to-Pay Penalty. Filing on time can save significant money in penalties.

At Books, Taxes & More, we are experts at helping our clients find the best course of action. Here’s a breakdown of options if one can’t pay your full tax bill:

1. Set Up an IRS Payment Plan

The IRS offers payment plans, also called installment agreements, to allow the balance to be paid over time. There are two types.

Types of Payment Plans:

Short-Term Payment Plan (up to 180 days): No setup fee, but interest and penalties still apply.
Long-Term Payment Plan (more than 180 days): Monthly payments through direct debit or another method; setup fees apply unless one qualifies for a reduced fee or waiver.

If the balance is $50,000 or less including penalties and interest, there is the option to DIY it online. We recommend having a conversation with Steve at Books, Taxes & More to be sure the balance is accurate. This should be done as soon as possible to minimize fees and avoid collection efforts.

If the amount is more than $50,000, or a taxpayer can’t full pay, we can help arrange either a structured plan with increases in the amount paid as income rises or partial pay installment agreements to pay off a part of the debt.

2. Apply for "Currently Not Collectible" Status

If one truly cannot pay anything without affecting basic living expenses, one might qualify for Currently Not Collectible (CNC) status. This temporarily halts IRS collection efforts (like wage garnishment or levies), though interest and penalties still accrue. This is designed to provide a reprieve to allow taxpayers to recover from a short-term financial shortfall to hopefully be able to full pay later. One of the great aspects of CNC status is that it doesn’t stop the statue of limitations for collections.

To qualify, one must provide detailed financial information showing that paying the tax bill would create financial hardship.

3. Request an Offer in Compromise (OIC)

An Offer in Compromise allows for a tax debt to be settled for less than the full amount if paying the full balance would cause financial hardship and there are no assets that can be sold to raise the capital.

It’s not easy to qualify, but the IRS considers:

Ability to pay
Income
Expenses
Asset equity

This is the last method to consider. It works when the taxpayer has very little in assets or income. Retirement accounts are cleaned out, homes with equity are sold, cars can be sold. It also stops the statute of limitations until after the OIC has been denied plus thirty days. Trying to do this DIY is a recipe for failure and extended collection windows.

This should only be attempted with the experienced tax professionals at Books, Taxes & More.

Seek Penalty Abatement or Relief

As part of the process of paying the debt, we seek penalty abatement when the inability to pay the tax debt was due was due to a reasonable cause (such as serious illness, natural disaster, or other unforeseen circumstances).

There’s also the First-Time Penalty Abatement program, available to taxpayers with a clean compliance history.

Avoid Tax Relief Scams

Be cautious about third-party companies that promise to "settle your tax debt for pennies on the dollar." In most cases these claims are not backed by the truth. It takes an experienced, qualified professional to determine if debt can be reduced, and if so, how.

Final Thoughts

Owing taxes one can’t pay is stressful, but the IRS provides ways to work things out without risking serious financial damage. The key is to call Books, Taxes & More at 678-717-9818 so we can take action early and communicate with the IRS. Ignoring the problem only leads to more penalties, interest, and potential collection actions.

Whether it’s a payment plan, request CNC status, or an offer in compromise, there’s likely a solution that fits your situation. We are here to help. We can be reached at 678-717-9818 or steve@bookstaxesatl.com.

#tax #taxes #irs #taxdebt #representation

Tax Relief Options: What To Do If You Can't Pay Your Bill

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