Going through a tax audit is bad enough. This means the IRS wants to talk to you about your return, and they may have a very good reason for this. While many people get out of an audit unscathed this is not always the case. Believe it or not, many people every year find that they owe the IRS more money after being audited. This is not a big deal if you have the money to pay this liability. But what if you don’t have the money? This is when you may really begin to feel the pressure.
If you are audited, owe more money, and cannot pay you need to know your options. It is safe to say that you know you will have to pay the money in one way or the next. The question is: how are you going to do this if you don’t have the money you need right now? There are many options, and some of them are sure to suit you better than others.First and foremost, and in many cases the best idea, you will want to request an Installment Agreement (Payment Agreement
) from the IRS. What does this mean? Simply put, the IRS will allow you to pay the money you owe in monthly installments instead of one lump sum. Of course, don’t expect to get away with this “loan” without paying interest. If you agree to an installment plan you will have to pay the money you owe plus interest.
Many tax professionals
may advise against opting for an Installment Agreement financed by the IRS depending on your situation. Instead, they suggest that you consider other options such as a loan from the bank or paying with a credit card. The reason for this is simple: you may be able to secure a lower interest rate if you search for your own financing. In the long run this means that the IRS gets what you owe them, and you do not have to pay back as much interest over the months or years.
The worse thing you can do if you owe more taxes is to hide from the IRS and think they will forget about this. If you do this you are digging a deeper hole; most likely one that will end up costing you even more money in the future.
If you cannot afford to pay the IRS what you owe in one lump sum tax payment
you need to consider other options such as making tax payments
or using a loan or credit card. For a full list of your solutions, give us a call or sign up for a free tax analysis.