Do you owe the IRS back taxes? In this case, you need to pay them as soon as humanly possible. That being said, you need to ask yourself this question: can I afford to pay the IRS all the money I owe at once? If you can send a lump payment you should do so. This will get you out of hot water with the IRS, and allow you to forget about your situation. If this does not work for you, there are other options although they may not be nearly as intriguing.
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Using an installment agreement is something you should not overlook. The nice thing about this option offered by the IRS is that you will not be responsible for paying your entire tax liability all at once. For example, if you owe $20k you can pay month by month until the entire debt is wiped out. This is perfect for people who owe back taxes, but do not have the money in cash to pay all at once.
Why would an installment agreement be a bad idea? For one, you will also have to pay interest and penalties to the IRS. In other words, not only are you paying back taxes, which you legitimately owe, but you are also going to get hit with other fees that will increase the total out of pocket amount. Even though you have to pay more, if this is your only option it is why you need to do.
Once you know how much money you owe the IRS you can then decide if paying via an installment agreement is the best option. If you compare this to paying in full you will be able to clear see which one will work best.
An installment agreement can be beneficial. Now that you know when you can use this option it may come in handy in the future.
A Stupid Credit Card Debt
I was recently divorced and I had no job. I was living at an old aunt's place, since I couldn't even rent a room and all I had was a credit card. I had already started paying the minimum amount and it was excessively overloaded. In the end, as it happens to most individuals in the same situation, they called me in to hand over the card, so they could void it.
Accumulative Interest
What came next was an endless "pilgrimage" with my few belongings, from house to house. No steady job, since I was quite battered due to the fact that in the course of just 30 days I was left without a job, without a family and no place to live in. I started a "dry" spell and it remained with me until I finally got round to a new atmosphere, new job and new energy. But the card debt... was accumulating interest.
It Is Easier Said Than Done
I had started a new era in my life, finding a new niche and exploiting it very well, since it was a free-lance job. In the end I slided into a self-employed situation that was very well paid. I had learnt to sell my services very well and quite dear. I remembered the debt at all times, but I just Pay Smarter didn't feel like putting my head on the chopping block.
The Inevitable
One day, the inevitable happened. My father had passed away and my family needed to sell the house to buy a smaller one for my mother. Seven brothers and sisters had to sign an authorization for the sale... But I was barred from all commercial operations because I had a debt. What started as a $5,000 debt was now, after 7 years, a nice fat sum of $20,000.
The Solution
My sister took a loan under her name and a small part of it was used for the moving and some repairs that had to be made on the new apartment. The rest was all to pay for my debt, cash down, so as to accelerate my legal rehabilitation. And now, came the real difficult part. I had to pay an installment of $800, at a time I had not planned to allot that much money to a debt I didn't even want to pay back.
Four Long Years
Forty-eight months of bleeding my pocket from its precious greenbacks. There was no other option. If I failed to pay, it could mean serious trouble for my sister and in the long run a default with the probable loss of my mother's house.
I still don't know how I managed to pay every single payment. The summer months are usually bad for business, since I was teaching English to Korean immigrants and when their kids had vacations, they dropped off. I skipped a payment at the very beginning, but made up for it the following month.
Conclusion
What I mean with this is that when you want to hold on to your precious home, and especially the home of those who depend on you, you don't know how you manage, but you pay up. And your property is never at risk. With a firm intention, there is no fear of not making it.