Receiving the dreaded notice from the IRS stating that you have a balance due can ruin your day. Especially if you were unaware that you owed money to the IRS to begin with. Depending upon your situation, you may have one or more than one of the following options available to you:
1. Challenge the balance due. People make mistakes, and the IRS is comprised of people. You may be able to prove to the IRS that the balance due is partially, if not fully, inaccurate and you do not in fact owe the specified amount. You may also have the ability to go to court to resolve this matter, if appropriate;
2. Pay the balance due in full. If you have confirmed that the balance due is accurate, this is the most efficient way to address money owed to the IRS. Some people choose to pay the balance due in full, even if they believe that the amount owed may be incorrect. These people typically decide to pay in full to avoid the accrual of additional penalties and interest. They may still have an opportunity to prove to the IRS that the balance due is inaccurate, and may be eligible for a refund if they act quickly enough;
3. Attempt to enter into an installment agreement. Depending on the facts and circumstances unique to each case, the IRS may be willing to grant many different types of installment agreements. Again, whether the IRS is willing to grant an installment agreement depends upon the specifics of the case.
4. Attempt to settle the balance due for a lower amount. The IRS may be willing to cut a deal with a taxpayer regarding the balance due. This is the option that most people would like. Unfortunately, many people do not qualify for this option due to inability to meet the terms and conditions;
5. Demonstrate to the IRS that you are not able to make any payments at the present time. If the IRS determines that you are not financially able to make payments towards your unpaid taxes, it may agree to delay any action against you for a period of time to allow your financial situation to improve;
6. Seek the reduction of some, or all, of the penalties. Depending upon your circumstances, the IRS may be willing to abate some, or all, of the penalties tacked on to the unpaid tax owed; or
7. Attempt to discharge some, or all, of your unpaid taxes in bankruptcy. Despite popular belief, some, or all, of your unpaid income tax may be discharged in a bankruptcy. If your unpaid income tax is not able to be discharged, you may be able to include your unpaid tax in a reorganization plan.
If you owe money to the IRS, the IRS may be able to take action against you. This may include the IRS seizing a portion of your paycheck, along with the funds in your bank, retirement and/or investment accounts. If that wasn’t enough of a devastating blow, your home and other possessions could be next. Communicating your intention to resolve your balance due will not necessarily prevent the IRS from taking these actions against you. Furthermore, the IRS may reject your tax resolution proposal.