Tax Troubles: Settling up with the IRS - WAFF-TV: News, Weather and Sports for Huntsville, AL

Tax Troubles: Settling up with the IRS

For most people, tax season means making a quick buck. For most people, tax season means making a quick buck.

For most people, tax season means making a quick buck.

For others, it means forking over some serious cash to settle up with the IRS.

"Typically, people owe money to the IRS because they haven't paid any of their back tax liability or they haven't filed tax returns in a number of years," said David Freeman with Liberty Tax Service.

The group of those that owe is small, just 20 percent of taxpayers, but if you find yourself among them, you could be staring down a debt you can't begin to afford.

"The tax system is a pay-as-you-go system, so you can't just end up with a huge tax bill at the end of the year without being penalized," said Dan Boone with the IRS.

And the longer you wait, the bigger bill.

"The IRS levies interest and failure to file penalties. That's where the majority of the big tax debt comes from," said Freeman.

For some, the knee-jerk reaction is to run, but experts say it is best to get to the bottom of things right away.

There are five - and only five - strategies for getting out of debt with the IRS.

You can set up a monthly payment plan through an installment agreement or a long term payment plan through a partial installment agreement. An offer in compromise is also an option, where you settle your tax debt for less than you owe, and if you have absolutely no way to pay, filing not currently collectible or bankruptcy may be your answers. But not all of these deals are easy to come by.

"The offer in compromise is something the IRS allows, but not many people qualify for that," Boone said.

"The easiest one is to create a payment plan with the IRS," said Freeman.

Experts say one thing you don't want to do is turn to a tax relief company.

"To go from $50,000 to $600 is extremely unlikely and extremely rare," Freeman said.

No matter which option you choose, the bottom line is you have to pay your taxes in some way or the other.

"The big thing is if you owe taxes, don't ignore the bills that come from the IRS. Stay in touch with the IRS, work with us, and we will work with you," said Boone.

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