Not all Americans get to enjoy a refund of taxes given. A few end up owing money to the Internal Revenue Service (IRS) after returns get completed. In case such a scenario comes to pass, there is absolutely no need to panic. The only downside is that you have to pay a few fines and penalties. The tax debts can be more manageable. An installment plan could be set up if requested.
Offer in Compromise
The IRS could go for the Offer in Compromise. This is an arrangement where you ask the IRS for a reduction of your tax bills. The latter agrees to the arrangement and you do not have to pay the full amount. This benevolence on the part of the IRS, however, does not come easy. You must meet certain conditions to make this happen. The most important criteria is that you have to prove that you really are in no condition to pay the full bill. You must prove that payment of the full bill will place you in a tough financial hardship.
To prove your precarious financial condition, you must provide adequate information to the IRS. This could be done by filling up Form 656. The IRS will then verify the provided information and if it accepts the data, you can be allowed to pay the bill as per IRS terms. In case the offer gets rejected, you can appeal the decision or submit a new offer. Be prepared for a backup plan as these arrangements are hard to get.
If the compromise plan is rejected by IRS or you did not apply in the first place due to fear of rejection, then you get the option to ask for the installment plan. This permits you to pay off the tax debt over a timespan. This is in direct contrast with the alternative to gathering the lump-sum prior to tax filing deadline.
For people stuck in such a predicament, the only good news is that these IRS payment plans payable over the short term are easy to set up. These do not cost money either. Longer-term plans cost money. The fee of $225 could be reduced significantly in case you are in the low-income bracket. Once the plan is set up, you must make the payments as per the plans. It should be kept in mind that a payment scheme which takes longer will be a more expensive one.