The arrival of a hefty income tax bill is a daunting experience, especially when it’s unexpected. For workers in their 20s to 60s who have faced this financial hurdle, fear not – there are avenues available to navigate through the process and minimize the associated penalties. This comprehensive guide will provide information on the various options for addressing unpaid income taxes, as well as an overview of the repercussions of non-payment or delayed payments.

The Importance of Filing Returns and Payments

Before delving into the ways to handle tax debts, it is crucial to understand that two distinct aspects are involved in paying taxes: filing your return and making the payment. Failing to file by the deadline results in a higher penalty than not paying the total amount owed. Therefore, even if you cannot afford to pay in full, ensure you submit your return or request an extension on time to minimize penalties.

Short-Term Tax Payment Agreements

If you believe that you can pay your tax bill within 120 days of the due date (April 15), consider applying for an online payment agreement. You may do so by visiting the IRS website or calling them at 1-800-829-1040 to inquire further. This option does not have any upfront fees, but late payment penalties and interest will still apply.

Long-Term Tax Payment Agreements

For those unable to pay their taxes within the 120-day window, there is an opportunity for monthly installments over a period of up to 72 months. There are fees associated with this option: $31 if your request is made online and the payment is a direct debit, and $130 if the fee is a non direct debit.

Temporary Delay in Paying Taxes

In cases where taxpayers cannot afford installment agreements, they may seek a temporary delay in their payments. This option does not relieve the debt but provides some reprieve as the IRS continues to evaluate one’s ability to pay during the interim period. Contact the IRS at 1-800-829-1040 for further information about requesting a temporary delay and the potential property liens that may be placed on your assets.

Offers in Compromise (OIC)

For some, the possibility of negotiating a lump sum payment less than the original debt might seem appealing. However, these offers are accepted relatively infrequently. To apply for an OIC, you must pay a non-refundable $205 application fee and usually make an upfront, non-refundable partial payment as well.

Seeking Assistance from the IRS Taxpayer Advocate Service

For individuals facing financial hardships due to tax disputes, the Taxpayer Advocate Service within the IRS provides free assistance. Contact your nearest office to determine how they can help you.

Avoiding Unscrupulous Outside “Assistance”

Be wary of private companies offering to assist with settling tax debts for less than owed, as their fees can be steep and some are untrustworthy. Instead, opt for the official IRS channels or the Taxpayer Advocate Service if you require additional help.

Taking Action to Resolve Your Unpaid Taxes

If a substantial income tax bill looms over your head, don’t ignore it. The penalties will only accumulate over time. Instead, review the options provided in this guide and consider taking action accordingly. Additionally, planning for next year’s tax season as early as possible may alleviate similar issues in the future.

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