Do you owe state or federal back taxes? Here are 3 tips to pay them off quicker
Owing federal or state back taxes is a stressful situation for any taxpayer. When back taxes – taxes that haven’t been paid on time – are due, its easy for the situation to spiral out of control. Missing back tax payments is never advised, as it only leads to more late penalties, interest payments, and you may even end up with a tax lien on your home.
It is possible to pay off back taxes, and taking some extra steps to ensure fast payment is always worth the effort. Here are some tips for how to quickly pay off your back taxes:
1. Know what you owe
The first step to paying off back taxes is to establish what is owed. The IRS will send a bill for any unpaid back taxes, so take the time to carefully read it to understand exactly how much is due. If you have paid some but not all your back taxes, then head over to the IRS website to see what is due.
From here, you can see what exactly is due, including all interest and late fees you are charged with due to missed payment. It will be updated from any payments made over the last 18 months, so determine what is owed – this makes it easier to build up a repayment strategy to pay off your debt quicker.
2. Create a monthly payment plan proposal
You have time to pay back any overdue back taxes, so take advantage of this by using the time to create a monthly payment plan. Don’t make the mistake of waiting for a collection plan to be given to you by the tax authorities, as you can create your own plan that works best for you.
So, sit down and write down your monthly income minus all expenses to establish how much you can afford each month. Set a minimum amount that leaves you comfortable – you can always opt to pay more each month if you wish – and choose a date for monthly repayments.
After this, decide on a payment method (e.g. checking account), and then submit your proposal to the IRS. Providing you have stuck to the above criteria, your proposal should be accepted. This ensures you have a solid payment plan in place, yet one that doesn’t leave you short each month and gives the opportunity to pay off as much as you can afford.
3. Request a waiver of your penalties
It may be possible to have any late penalties waived by the tax authorities. This does require you to have some history of paying taxes on time and it must be your first time making such a request. First-time waivers are very helpful and could save you a lot of money in late fees and interest, so be sure to request one.
If successful, your monthly bills will be reduced by a fair amount, making it easier to quickly pay off your back taxes.
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