What is the fastest way to get into deep trouble with the IRS?
You may think you know the answer, but you don’t.
It’s not: Not paying your taxes. The real answer is sticking your head in the sand and attempting to hide from the IRS. Maybe if you don’t pay taxes, the IRS will just go away – right? Wrong! That line of thinking is how a little debt turns into a mountain of financial problems. We can help, but as they say, an ounce of prevention is worth a pound of cure.
What happens if you can’t pay your taxes? (It’s not as bad as you think!)
When your accountant gives you the tax bill for the year, you may be surprised to see an amount you can’t possibly cover by the deadline. The good news is if you handle this situation the right way, the IRS will work with you to manage the payment.
First, have a professional look over your tax paperwork to make sure you’re not overestimating. Every year the list of tax credits changes, which means you may be eligible for discounts.
Send in your return by the filing deadline – because you don’t want to add the penalty for filing late to the penalty for paying late!
Next, figure out an amount you can pay right now. Look outside the box for income you may have access to, like rewards on your credit card (or your credit card), home equity, or cash from unused sick days at work. Paying as much money as you can now will reduce the late payment penalty and lower interest charges later.
You Have Options
If you just need time until your next paycheck comes in, you can file for an extra 120 days to pay – but if that isn’t enough time, you have other options too.
Let’s say you owe more than $1,000. That’s more than you want to put on a credit card (assuming you have credit to spare), because the interest payments will eat you alive. However, you can work with the IRS to set up an installment plan for a small fee in which payments are direct-debited from your bank account.
What if you can’t pay your taxes at all? Sometimes people suffer from economic hardships that won’t go away any time soon, and paying taxes is practically impossible. The IRS isn’t out to ruin you (though it may feel that way sometimes) – they’d rather work with you. Ask us about how to request a temporary delay in the collections process, or apply for an Offer in Compromise which allows you to settle your tax debt for less than the full amount.
Often, we handle cases in which taxes have gone unpaid for years – and we specialize in helping both sides come to a reasonable resolution. But, as with most things, if you catch debt early it’s that much easier to handle!
If you think you can’t pay your taxes this year, don’t stick your head in the sand. Connect with me today on TaxConnections.
Original Post By: Barry Fowler