More Than One Way To Pay Taxes

ROCKVILLE, MD. –– For some people tax season is a glorious time when DVD players, new computers, and weekend spa getaways are only a refund check away. For others it is a time when panic and desperation take hold as a huge tax bill stares them in the face.

“Taxes are a financial demon that lurks in the back of people’s minds, but when April 15th arrives many people end up stuck without a penny or a plan,” said Steve Rhode, president and co-founder of Myvesta, a nonprofit consumer education organization. “The Internal Revenue Service is not an organization with which you want to be in trouble.”

Unlike credit card companies and collection agencies, the IRS has a considerable amount of power when it comes to collecting tax debts. “The IRS can garnish your wages and seize your property without having to take you to court. If you think you’re going to have a problem paying a tax bill, you need to explore all of your payment options right away,” Mr Rhode said.

If you cannot afford to pay your total tax bill all at once, one option is to set up a payment plan through the IRS. “A payment plan is a good idea if you know you are going to have a steady income until the tax debt is paid off,” Mr Rhode said. “Even though there are fees involved with setting up a payment plan and you will have to pay interest, it’s much better than having the IRS take collections actions against you.”

If there is a reasonable doubt that you owe the tax, or if you can prove that the IRS will not be able to collect the tax because of your financial situation, an offer in compromise is an option. “An offer in compromise can lower your tax bill by half or more, yet still has to reasonably reflect your ability to pay back the debt,” Mr Rhode said. “If your offer is accepted you must meet all of your tax requirements for the next five years and if you don’t comply with the terms of your offer the IRS may reinstate the entire tax liability.”

More options for paying a tax bill are outlined in the Myvesta publication How to Deal with the IRS if You Can’t Pay Your Taxes. It can be downloaded free online from Myvesta.org, or for a printed copy send $5, payable to Myvesta, to IRS Publication, Myvesta, PO Box 8587, Gaithersburg, MD, 20898-8587.