Because I own my own business and have for some time now I am almost always assured of having to pay money to the IRS come tax time. I have learned to budget for my taxes so I don't run into the problem of coming up with a monetary shortfall, but that was only after I learned the hard way my first year in business. While the IRS can be a scary entity to tangle with I have found they are more than willing to work out a deal and there are options that can help penalties and trouble be avoided.
What the IRS Can Do
When I owed almost $4,000 the IRS I was tempted to not file a tax return as I simply didn't have the money to pay what I owed. But I quickly learned that no matter what, the IRS will get their money eventually and the harder I made it on them, the harder they will make it on me. If they wanted to they could have garnished my wages and/or seized my property so it goes without saying that the IRS was not to be messed with.
Lessening the Hit
When I figured out that the IRS could come down on me with full vengeance if they chose to do so I found out my options in a hurry. What I found was that there is no way to avoid paying certain penalties, but I could lessen the blow.
If I failed to file I found that my penalty would be 5% for each month I did not file after the April deadline. This was capped at 25% but that is still a huge number as far as penalties go. On the other hand, if I filed I was only going to be hit with a 0.5% penalty each month which was far easier to swallow. So, I filed and sent in what I could per the IRS instructions.
When I called into the IRS I was nervous and thought that they would be hard to work with. What I found though is that they are quite willing to help and I had a couple of options. The first option was to get an extension of time to pay of 120 days. If I chose this then I would pay the balance due on or before the 120th day with interest predetermined. When I told them I couldn't do that I was told of another option of payments. Working with me the IRS informed me I had up to five years to pay off my balance and they then helped me set up a monthly payment plan that I could live with.
Although the end result was about $2,000 in penalties and interest, it was far better in my eyes then the possible trouble I could have gotten into with the IRS. While the name IRS is enough to make many people shiver, they can and will work with those who ask for help and I found they aren't quite as scary as I originally thought.
*Note: This was written by a Yahoo! contributor. Do you have a personal finance story that you'd like to share? Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.
More from this contributor:
- Politics & Government