Personal Finance

Web Extra: What to Do If You Owe the IRS

OTM Web Extra

If you owe the IRS, you need to take action or they will levy your bank account, garnish your wages or seize your property. Here are three tips that will help you if you're in debt to the tax man, courtest of tax attorney Roni Deutch:

1. Offer in Compromise: If you cannot afford to full pay the IRS but can afford to settle your debt for less money than what’s owed, you should file an offer in compromise with the IRS. The OIC program is wonderful and if you qualify, your tax debt is eliminated for far less money than what you owe. The IRS will evaluate your income, expenses and asset value before settling your tax matter for less money.

2. Installment Agreement: If you do not qualify for an Offer in Compromise then you should enter into an affordable monthly payment plan with the IRS until your liability is paid in full. Many people make monthly payments to the IRS but they will never full pay the debt. By making monthly payments, you are making a good faith effort to contribute something toward your debt and you will not be garnished or have money taken from your bank account.

3. Currently Not Collectible: If you owe the IRS and have absolutely nothing, they will classify you as CNC and they will leave you alone! Again, you continue to owe the taxes but at least they have thrown you into a black hole and you will no longer be bothered. When you get a job or land on your feet again, you must call the IRS and work out a payment arrangement or file an OIC.