Tax Tips: What to do if you owe the IRS

It's one nightmare everyone hopes to avoid: owing the IRS a lot of money. It's not pretty, but it happens a lot. What do you do? Well the worst thing you can do is to not file a tax return. If you prepare your taxes and find you owe a lot of money, you must still file the return. Not filing can open you up to penalties that you don't need added onto your bill.

You should try to pay as much of the tax bill as you can right away. That will limit the interest and penalties you will get for paying late, and those can add up fast. The IRS does accept credit cards, so that might be one option for paying what you owe. Obviously, you've got to be careful with this option as well, because credit card debt is expensive too.

It's also possible to make an installment plan with the IRS, whereby you pay a certain amount toward what you owe each month. The IRS will be looking for you to stretch and pay off your balance as quickly as possible, so don't expect that they will accept a few dollars a month. Offer to pay as much as you can, as fast as you can. Just get it over with!

The worst thing you can do if you owe money to the IRS is to ignore it. They will get their money from you one way or another, and tactics can include taking money out of your bank account or putting a lien on your home. Contrary to what you may have heard, the IRS is often very reasonable when you're being forthcoming and cooperative.

More Tax Advice

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.

Birth of a Child

The birth of a child is not just a blessed event; it's the beginning of a whole new set of tax breaks for your family. Learn how the newest addition to your family can help trim your tax bill, and how to save for your child's future in the most tax-efficient manner.

Read More

Brought to you by TurboTax.com

What is Form 8332: Release/Revocation of Release of Claim to Exemption for Child by Custodial Parent

Having custody of your child usually means you can claim that child as a dependent on your taxes. But if you don't have to file a tax return, or you reach an agreement with your child's noncustodial parent, you can let them take the child as a dependent instead with Form 8332.

Read More

Brought to you by TurboTax.com

How Does Your Charitable Giving Measure Up?

Giving is truly better than receiving, especially when your generosity can provide income tax benefits.

Read More

Brought to you by TurboTax.com

Real Estate Tax Tips: Owning Property as a Tenancy in Common

"Tenancy in common" (or TIC) refers to a situation in which ownership of a piece of property is divided among multiple people. When the owners of a piece of real estate have a tenancy in common, it can create a number of complications related to taxes.

Read More

Brought to you by TurboTax.com
Read Full Story