I thought this would be an appropriate article to put up considering that today is April 15. Of course, you do actually have until this Monday to submit your taxes if you need to. Regardless, if you’re sitting in front of your tax return, and you owe money, but you are unable to pay the IRS in full, I thought it might prove helpful to offer up a few tips and strategies on how to best handle the situation.
Don’t Ignore The Problem
The first thing that you should absolutely do is still file your return on time! Do not ignore the problem. The penalty for failing to file (5% per month) is much more severe than the late payment penalty (.5% per month of the unpaid balance up to 25% of the balance). However, there is another option if you act fast.
File For An Extension
You can file for an extension, which would delay your filing deadline until October 17. The bad news is that interest will continue to accrue on the unpaid balance. The good news is that you’ll avoid the late filing fees that I mentioned above, IF you have paid at least 90% of your actual tax liability before the original April 18 deadline and pay the balance when you actually file your return.
Pay What You Can
If you don’t want to file for an extension, hopefully, you are at least in a position to where you can send in at least a portion of what you owe. If so, send as much as you can possibly afford. This will reduce the amount of penalties and interest that you’ll have to pay in the long run. So, file your return on time and send in whatever you can. The next question is: how to deal with the remaining balance. Here, you have two options.
Wait For The IRS
Personally, I would not suggest this route. When it comes to the IRS, I would rather not play around. However, if you choose to, you can just wait for the IRS to get back to you. Usually, it will be around 45 days. If you do anticipate being able to pay the balance owed in full in less than 45 days, then maybe this is a more convenient option. However, if you don’t think you can come up with the amount owed in six weeks, then I would move on to my next point.
Propose Your Own Payment Plan
As I said earlier, if it were me, I would stay as “out in front” of this as much as I could. The way to do it would be to propose your own payment plan. It’s actually pretty easy to do. If you can pay the full amount within 120 days, you can simply call the IRS to explain, and you can avoid the fee to set up an installment agreement. If you can’t, then you’ll need to file Form 9465 with the IRS. There is an option to do this online. However, it does come with some fairly hefty fees. They can range anywhere from $43 to $105, depending on your income and whether you pay them by electronic funds withdrawal, or send in the money. The electronic funds withdrawl is the better option of the two. Once the installment agreement is filed, the IRS will usually let you know within thirty days if your proposed request is approved or denied.
Closing
So, in a nutshell, if you can’t pay your taxes, do not sweep it under the rug!! File your return on time, send in as much as you can, and choose one of the options above as to how to get this taken care of quickly. You do not want to mess with the IRS! And, once you’ve got this issue settled, you may want to look at ways to save on groceries, ways to save on gas, and things you can get for free, so maybe next year when tax time rolls around, you won’t have to deal with this problem.
What are your thoughts on how to handle not being able to pay your taxes? Your comments are appreciated below.
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