The first question is: are you sure you really owe this money? A lot of times, you owe only because you did not file your tax return, or because you made a mistake on this return, or because the IRS made a mistake.
- If you never filed a return – file it as soon as possible
- If you made a mistake – file an “amended return” (form 1040X) to fix the mistake
- If the IRS made a mistake – call or write to them and try to get it corrected
- If you’re not sure or afraid of the IRS – hire a professional
Assuming that the debt is valid, and you agree with the amount, your options are:
- Borrow money and pay the IRS (they even accept credit cards, although for a fee)
- If you owe less than $50,000 you can set up a “streamlined” payment plan over 6 years, officially called Installment Agreement.
- If you owe more or can’t afford the 6-yr plan, call the IRS and negotiate a custom Installment Agreement.
- If you’re in a financial hardship, call the IRS and explain. They may give you a temporary break, officially called “currently not collectible.”
- In some cases, you may be able to apply for a permanent settlement of your debt, called Offer in Compromise. It sounds much better than it is in real life, and companies who advertise on TV are guilty of misrepresentation. Check with an experienced professional before setting your expectations.
- If all this sounds like too much trouble, hire a professional to help you.
Good luck!