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Payment Options for Tax Debt

Have you received a letter from the IRS stating that you owe additional taxes?

Are you unsure of why you owe the tax or what you need to do to resolve the tax debt?

Are you wondering if you have other options?

The answer is yes! You have options when it comes to resolving your tax debt. But first, we know tax debt can be overwhelming, frustrating, and even a little scary for some people. Let's face it, no one ever wants to get a letter from the IRS, let alone, owe them additional, unpaid taxes.

If you find yourself wondering, "how did I get here?", or "where did this come from?", here are few reasons why you may owe taxes. Please note that this list is not inclusive of all possibilities.

  1. You filed a return that resulted in a balance due.

    1. If you did not pay all the tax when you filed your return, the IRS will send you a letter for the remaining balance due.

  2. You have unfiled tax returns

    1. Even if you do not file a tax return, the IRS still may know you earned income and did not pay taxes.

    2. How? When your employer sends you your W-2 at the end of the year, a copy of it also goes to the IRS. When you file your tax return, it should match what the IRS already has on file. If it doesn't you could owe taxes.

    3. Consequently, if you never file the tax return, you will receive a letter for the full amount of tax that is due on the income that was reported by your employer.

  3. Errors on a filed return

    1. The most common reason for getting a letter from the IRS and owing taxes is because of errors on the tax return.

    2. This can happen whether you are aware of the error or not.

    3. Common errors include...

      1. Calculation errors

      2. Claiming credits and deductions that cannot be verified and are now disallowed

      3. Incorrect filing status

      4. Falsely claiming dependents

      5. Incorrectly reporting data from tax forms or other information on the tax return

So now you see how you got the letter and balance due. Now how do you resolve it? Remember, you have options!

Option 1: Pay the balance in full

This is the fastest way to resolve your tax debt and results in the least amount of interest. However, if this is not feasible for you, here's another option...

Options 2: Pay the full amount that is due over time.

If you agree with the balance due, you can make monthly installment payments on the amount due until the balance is paid off. Interest is added to the balance and there is a setup fee for the monthly payment plan. However, there is another option...

Option 3: Settle for less

If you disagree with the amount that the IRS is requesting, you can reply to the letter stating why but you will need some documentation to support your reason. You can also amend your tax return, fix the errors, and resubmit a correct tax return that may result in lower amount due.

There is also the option to ask for a reduced amount due to hardship if you simply can't afford to pay the tax. You can have your tax debt significantly reduced or even eliminated. This requires paperwork to be completed but the IRS has online tools that can assist with this request. However, we recommend working a tax professional for this option.

If you need help with your IRS letter, contact us for assistance. We can discuss your matter with you and help you reach the best option for your situation. Contact us by phone, email, or just click here.

Dukes Accounting & Tax Services

1175 Vickery Lane Suite 201

Cordova, TN 38016


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