What To Do If You Owe The IRS With Anthony O’Neal
CHARLOTTE, N.C. — While there is a shock of getting a smaller tax refund, owing the IRS can be terrifying. WCCB Rising’s Derek talked with financial expert and host of “The Table” on YouTube Anthony O’Neal about what to do if you owe money this year.
- Don’t panic.
- Tax day is almost here. Some people may get a refund on their taxes, but others may be dealing with a surprise tax bill.
- Tax debt can be scary. No one wants to owe the IRS money!
- If you do owe on your taxes, it IS serious and you DO need to take action. But don’t panic.
- Panicking will lead you to doing things like taking on debt to pay for debt. That’s not how to handle this situation. There are other solutions.
- Set Up a Payment Plan.
- If you don’t have enough money saved to cover what you owe on your taxes, you can apply to set up a payment plan with the IRS. Do it ASAP.
- There are short term and long term payment plans.
- Go to IRS.gov to get the specifics for which plan you may be eligible to apply for.
- The benefit of setting up a payment plan is that it allows you up to 180 days to pay the bill.
- The downside is that you’re paying interest and penalty fees. So it’s important for you to get serious about paying it off.
- Offer in Compromise.
- One other possible option is to apply for an offer in compromise. This one is tricky and the odds of approval are lower.
- You’re offering the IRS a lower amount that you can pay in hopes that they will lower the amount you owe and settle your debt.
- You have to prove that paying this debt is a financial hardship for you. They will look at your income, expenses, assets, etc to determine if you have a decent enough income to cover the debt.
- You have to apply for this and there are some stipulations, so it’s best to work with a tax advisor.
- Don’t Take on More Debt.
- It might be tempting to take on more debt, like a personal loan, to pay your tax debt.
- But I do not recommend this. You’re only digging yourself further into a hole. And with the Fed raising interest rates and with several more interest rate hikes planned, that is not a good option.
- Your best bet is to apply for the short or long term payment plan, depending on which you are eligible for and to attack that debt with everything you can.
- Once you’re approved for a payment plan, make minimum payments on all other types of debt and throw everything you can at your tax debt for now.
- Get aggressive about paying it off. That might mean picking up a side hustle, taking on extra hours at work and cutting out all unnecessary expenses.
For more tips on how to cut expenses and increase your income, visit anthonyoneal.com.