If you find yourself in a situation where you need to pay back taxes to avoid a lien, but you don’t necessarily have the means, there are ways to go about it that can keep your head above water. You don’t have to go broke while paying back the IRS.
Adjust Your Tax Withholdings
One thing you can do anytime throughout the year is adjust your tax withholdings on your W4. If you are working, this can be one way to either pay back your taxes faster, or ensure you don’t accrue more of a burden down the line. Bringing your withholdings down to 0 can ensure you won’t owe many or any taxes come next tax season. This will mean you won’t accrue any more interest while paying back what you already owe. Bringing your withholdings up can put more money in your pocket, helping you pay off your tax burden faster. However, that means you could also end up owing taxes by bringing up your allowances. When determining what amount of withholding is best for your situation, we recommend speaking with a tax professional to determine the proper withholding based on your income and tax situation.
Get on a Plan for Repayment
Something you should try and do right away when faced with paying back taxes is work with the IRS to see if you're eligible for a plan for repayment. You should request this solution if you believe you will be able to pay your taxes in full within the extended time frame. You can apply for an installment agreement online, over the phone, by mail, or even in person at walk-in IRS locations if you have the proper forms. There are short-term plans for individuals who can pay their back taxes within 120 days or less. Long-term plans would be for auto-payments for 120 days or more. This method is subject to installment fees depending on the situation. Talk to a tax professional to determine if you are eligible for an installment agreement. Your best bet is to set up auto-payments straight from your bank account to the IRS. We do not recommend putting tax settlement payments onto a credit card. The interest rates are much higher, and you could end up paying more back to your credit card company over time than you would paying the IRS.
Negotiate a Tax Settlement
A tax settlement is an arrangement the IRS or State can accept to settle your outstanding taxes for less than the original amount owed. This is sometimes allowed when extenuating circumstances exist that would prevent you, the taxpayer, from paying your outstanding taxes in its entirety. There are requirements set out by the IRS to determine your eligibility for a tax settlement, but having a tax professional review your case and start negotiations right away is going to be your best bet. Don’t attempt to negotiate on your own, it’s what the trusted professionals at Tax Relief are here for.
Pay Estimated Taxes
Taxes are paid as you earn income during the year, either through withholding allowances, or estimated tax payments. If the amount of income tax withheld from your salary or pension is not enough, or if you receive income in ways other than a regular salary, you may have to make estimated tax payments. Estimated tax is used to pay income tax, alternative minimum tax, and self-employment tax. Paying estimated taxes is an alternative to adjusting your withholding allowances. They will be based on what amount of taxes you expect to owe based on your salary, and paid throughout the year. They can be adjusted similar to withholdings, and can help alleviate the pressure of paying back taxes in time.
It can be nerve wracking to fall behind on your tax payments. Just know that you are not alone. Tax Relief has been representing people for years with tax issues like owing back taxes, or fighting a lien on their property. We’ll represent you and take over all communication and negotiations between you and the IRS while we help you reach a resolution.