First of all, ignoring the IRS when you owe money is the worst thing you can
do. Simply not filing a tax return because you cannot afford to pay what you
owe will only delay the ineffidable. As once the IRS catches up to you, there
will be more interest and penalties, and even other actions—such as having a
tax lien put against your assets. The best thing to do is to communicate with
the IRS and let them know that you want to take care of the problem.
The Aftermath
Once the IRS has accepted your installment agreement, you will receive a
bill every month listing what you owe and how to make the payment. You can pay
your monthly installment online through the IRS web site, or by calling the IRS
and paying over the phone. In addition, to insure that you don’t forget to make
the payment, you can have the installment automatically deducted from your
checking account each month.
If you fail to make your payments as required, the IRS can withdrawal their
agreement and take other actions to obtain what you owe. In addition, if you
find yourself owing more money next year to the IRS, the installment agreement
can be extended to include the new amount owed. The IRS may require additional
forms so that they can determine your specific financial situation.
The bottom-line on your taxes is to try to prevent owing the IRS money at
all. The interest and penalties that accrue are quite expensive when compared
to other types of loans. In addition, you do not want to find yourself in a
perpetual cycle of paying the IRS. Do everything possible throughout the year
to not be caught off-guard on April 15th.