To negotiate payments with the IRS, file on time, check for errors, and propose a repayment plan with a realistic monthly payment. Notify the IRS in writing if you cannot make a payment and evaluate your withholding status to avoid future tax debt.
Some people are unpleasantly surprised to discover that they owe more income taxes than they can afford to pay when filing taxes. There are several ways to negotiate payments to the Internal Revenue Service (IRS) that can make it much easier to refund your income taxes owed. Most importantly, be sure to file on time and make all scheduled payments on time as the IRS can assess high fees if you don’t stick to your agreements.
Before filing, you should also be sure to check your tax return for possible errors. Often people calculate taxes incorrectly. Check for errors and possible loopholes, which can reduce or eliminate your tax debt.
If the income tax you owe is a large amount and too difficult to pay right away, the first thing you should do is write a letter to the IRS with at least a partial payment. This amount doesn’t have to be huge, but it should be at least 10% of the amount you owe, when manageable. If the amount needs to be lower, this is usually acceptable, as it establishes a willingness to pay.
Instead of simply not paying or not filing a tax return, you should file in time to avoid fines and taxes. Also, your tax return should be accompanied by a written statement about how much you can and expect to pay on a monthly basis. Make sure this amount is realistic and can be met exactly as outlined in your proposed repayment plan.
The advantage of proposing a program is that it allows you to set the terms for your repayment, rather than leaving the matter to the IRS. The IRS may reject your offer, particularly if the repayment will take more than a year. However, oftentimes, the IRS is quite happy to work with a person who demonstrates seriousness and willingness to pay taxes.
After you define a plan and even before you receive a notification from the IRS, start making the proposed payments. It is essential that you comply with the terms set out in your agreement. The IRS is likely to be more amenable to an agreement that has already been honored. Additionally, the IRS can respond to non-payment by collecting your paychecks, so staying up-to-date on your debt is very important.
If for any reason, you are unable to make a monthly payment, you must notify the IRS in writing. You must provide a good reason. You can also call the IRS to let them know, but any communication with the IRS about income tax refunds should also be in writing. Keeping good logs is helpful if you need to refer to them in the future.
Also, evaluate your current withholding status to see where mistakes were made. One does not want to face the following year with a new income tax debt to pay. Often people make the mistake of taking too many income tax deductions during the year, resulting in insufficient deduction. Talking to an accountant, or someone helpful in personnel or human resources about your job can help you avoid income tax debt in future years.
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