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Economy Project: Owing Money To The I.R.S.

By Sam Baker, KERA Morning Edition Host

Dallas, TX –

Most people will get a refund this tax season. Some will owe money. But what happens if you can't pay all or even part of the amount? Sam Baker spoke with Clay Sanford of the Internal Revenue Service in this week's economy segment. He says you do have options, and the IRS is finding more people in need of them.

Clay Sanford: When the economy first took a downturn two years ago, the IRS recognized it would have to enhance some measures we already have in place to help people who can't pay everything they owe when they need to pay it.

Sam Baker: What does that mean exactly?

Clay Sanford: If you had, in the past, applied for an offer and compromise, and an offer and compromise is a program that the I.R.S. has in place for taxpayers who have fallen on hard time, we look at what you can pay. We come to a compromise as what you can pay based on what you owe. So one of the enhanced measures that we've used was if you had applied for an offer and compromise before the economic downturn, and you were turned down for that, then you could re-apply and we'd take a look at it - especially for people who have never had problems paying taxes before. And we find that especially with the economy the way it is now, we find more of that than anything else. We're seeing people who for 20 years they've been on time every time. They filed when they need to file. But all of a sudden, something's wrong.

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Sam Baker: Okay, when you find yourself in that situation, what's the first thing you do?

Clay Sanford: Well, there are a couple of options. We have out 800 number: 1-800-829-1040 or 1-800-TAX-1040. Then we have another thing called the taxpayer assistance center. It is purely a walk-in type service. They can tell you anything about your account you can get on the 800 number. Sometimes, face to face help is better. It's easier sometimes to explain your situation. You can also bring paperwork with you.

Sam Baker: Some can be approved for the payment plan. Some aren't. What's the criteria?

Clay Sanford: It's relatively easy to get a payment plan. And then you might find it easier to put what you owe on a low-interest credit card.

Sam Baker: So, in other words, they want to know if you have any other means or ability to pay.

Clay Sanford: Absolutely.

Sam Baker: Let me go a step backwards. When you do the return and you find that you owe money and can't pay all of it at one time, obviously you have to send in a return, but should you send some amount of money, even if it's just a fraction?

Clay Sanford: You know, look at owing the I.R.S. just as you look at owing any other debt. If you pay as much as you can - let's say you owe $500 and you can only pay $200 - if you pay the 200, you're going to avoid penalties and interest on that amount. So the more that you can pay on the deadline, which every year is April 15, then the less penalties and interest you're going to owe.

Sam Baker: Sounds like there's an interest rate or something with that.

Clay Sanford: Yeah

Sam Baker: Is it typically higher than what you might pay on a credit card?

Clay Sanford: It is.

Sam Baker: So even if you've lost a job, you're still expected to pay even though there may be no income coming in, or does the I.R.S. make allowances for that?

Clay Sanford: You're expected to pay what you owe in tax. We're especially interested in people who've never had trouble filing or paying taxes before.

Sam Baker: Okay, but if you are one of those who have had that trouble, are you likely to find it more difficult to be approved for a payment plan?

Clay Sanford: You would. If you're just someone who is a straggler and you've just not paid taxes for several years, you would find it harder to qualify for something like that.

Clay Sanford is a spokesman for the Internal Revenue Service.

For information on how to get help filing for an installment plan, and where you can find free help preparing your taxes, go to

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