En español | It happens to the most honest of us. You make a financial decision or two that leaves you owing a hefty tax bill to Uncle Sam. Now the IRS is breathing down your neck. You want to pay. But you can't fathom where in the world the money's going to come from.
Depending on your circumstances, you may be granted a short extension period to pay your tax in full. — iStockPhoto
Often, it's the self-employed who get into this trouble by missing quarterly payments and never catching up, says Greta Hicks, a Houston-based CPA who once worked for the IRS. But in these economic times especially, people of all kinds are getting behind. "Some have to withdraw [money] from retirement plans and IRAs. And then they owe taxes on that."
Do you owe the IRS right now? The first thing to do is open all mail from the agency so you're on top of the matter. Next, stay calm. Well, it's understandable if you panic a little, because the IRS wields power that can make your life miserable.
Depending on your situation, the agency can take your paycheck and your bank and retirement accounts, Hicks notes. And more: "They'll seize land, business assets, cars — anything they can auction and turn into cash quickly."
But all is not lost if you act now. Consider the following six strategies to get back in good graces with Uncle Sam:
1. Ask for more time. Depending on your circumstances, you may be granted a short extension period to pay your tax in full. You can request this by filling out an application for an online payment agreement or by calling 800-829-1040.
2. Try for an installment plan. If you owe $50,000 or less in combined taxes, penalties and interest, you can fill out the application for an online payment agreement. If your bill is more than $50,000, you'll also need to use paper form 433-A (PDF) (for self-employed individuals), 433-B (PDF) (for partnerships, corporations and limited liability corporations) or 433-F (PDF) (for your personal household taxes). Be prepared to divulge accurate financial details. Fees for setting up payment plans can range from $43 to $105.
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