5 Things To Do Immediately If You Owe the IRS Money in 2024
You’ve gotten all of your forms together. Your deductions and exemptions have been calculated. You even reached out early to your CPA to book an appointment. Sounds like you are ready for whatever tax season has to throw your way. Only there’s one little snag: you owe the Internal Revenue Service (IRS) some money, and it’s not going to be a small amount.
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There’s any number of tax-related reasons why you might need to send the IRS a check. There are also a few things you should do right away if you have an outstanding balance with the government. Here are five things to do immediately if you owe the IRS money in 2024.
Don’t Ignore the Debt
Just because you pretend that you didn’t see the final figure added up on your calculator — or you ignored the notices that were mailed out to you — does not mean that the money you owe will suddenly disappear.
“Ignoring your tax debt won’t make it go away,” said Steve Crews, a representative of Golden Road Reborn. “In fact, it can lead to increased penalties and interest charges. The IRS charges a failure-to-pay penalty of one half of one percent for each month, or part of a month, up to a maximum of 25% of the amount of tax that remains unpaid.”
“Prompt action can help avoid additional penalties and interest,” added David Brillant, a tax and trust and estate attorney with the Brillant Law Firm. “Contacting the IRS to discuss installment plans or temporary delays in payment can demonstrate goodwill and may provide temporary relief.”
Brilliant gave the example that “…under the People First Initiative announced in March 2020, the IRS relaxed certain payment requirements temporarily, a precedent indicating potential future leniency under specific circumstances.”
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Explore Payment Options
If you owe money to the IRS, the good news is that you usually do not have to pay in full right away. There are ways to come up with a payment plan that works for you and your family, but you need to be upfront and honest about your financial situation.
“If you can’t pay your tax debt in full, the IRS offers several payment options,” explained Crews. “You may qualify for a payment plan, such as an installment agreement, which allows you to pay monthly. For debts under $50,000, you can apply for a long-term payment plan online.”
Brilliant added, “…reviewing your tax position for any overlooked deductions or credits with a tax professional could identify areas to reduce the overall tax liability.”
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Consider an Offer in Compromise
If you find yourself in debt to the IRS, do not worry: other taxpayers have been in your position prior to 2024, which is why there is the option to do an Offer in Compromise (OIC).
“An Offer in Compromise might be an option if you’re unable to pay your full tax liability or doing so creates financial hardship,” Crews said. “This agreement allows you to settle your tax debt for less than the full amount you owe.”
For cases of extreme economic hardship, Brilliant offered that it’s worth applying for an Offer in Compromise, because it “might allow for a settlement for less than the full amount owed, if the taxpayer’s situation qualifies, a process I’ve guided clients through successfully on multiple occasions.”
Seek Penalty Relief
The IRS can hand out penalties to taxpayers that owe them money, but they can also offer various forms of penalty relief — that is, if you have a clean and upstanding record with them in prior tax seasons.
“The IRS provides penalty relief for taxpayers who meet certain conditions, such as first-time penalty abatement or reasonable cause,” said Crews. “If you believe you qualify, don’t hesitate to ask for relief.”
“Getting the ‘Currently Not Collectible’ status may work if you can show paying would cause real financial hardship, which pauses collection efforts temporarily,” explained Ashley Connell, the founder of Lease Extensions and a member of ALEP (Association of Leasehold Enfranchisement Practitioners). “These choices take lots of paperwork and sometimes haggling with the IRS, but they can be a huge help if you qualify.”
Get Professional Help
If you find there is truly no way out of paying the money you owe to the IRS, it might be time to reach out to someone who knows the tax business inside and out. That could be an attorney, accountant or someone else you trust to help you sort out your ongoing and outstanding tax debt with the government.
“If you’re unsure about how to proceed, consider consulting a tax professional,” Crews said. “They can help you understand your options, negotiate with the IRS on your behalf and ensure you’re taking the right steps to resolve your tax debt.”
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