What If You Can"t Pay the IRS the Taxes You Owe?
So you have your tax return filed and you realize that you owe a whole bunch more taxes than you can pay at the current time.
Relax, you are not alone, you won't go to jail, this is fairly common and especially this year with the financial crisis it is happening to more people than ever.
One important thing to know is that even though you can't pay, you still must file your taxes.
It is not a criminal act to not pay your taxes, but it is a criminal act to not file your taxes.
Also, know that there is a 5% penalty a month imposed on tax returns that are not filed but only a 1% interest charge imposed on unpaid taxes, so get that tax return sent in first, then worry about the taxes that you owe or else that amount owed will add up to more and quickly.
Some Options if You Cannot Pay Your Taxes
They will be able to handle the IRS dealings for you and will likely be able to figure out the best solution for your particular tax situation.
In summary, if you can't pay your taxes owed, be sure to file them first, then figure out a solution to paying second.
Remember that the IRS is willing to work with individuals on taxes they cannot pay.
Relax, you are not alone, you won't go to jail, this is fairly common and especially this year with the financial crisis it is happening to more people than ever.
One important thing to know is that even though you can't pay, you still must file your taxes.
It is not a criminal act to not pay your taxes, but it is a criminal act to not file your taxes.
Also, know that there is a 5% penalty a month imposed on tax returns that are not filed but only a 1% interest charge imposed on unpaid taxes, so get that tax return sent in first, then worry about the taxes that you owe or else that amount owed will add up to more and quickly.
Some Options if You Cannot Pay Your Taxes
- Installment Agreement - The IRS is fairly lenient in giving individuals installment agreements, especially if they owe less than $25,000.
With an installment agreement, the IRS will allow you to pay off the taxes owed in monthly payments.
Just know that interest is still applied to the amount you owe, so the sooner you pay off the amount owed, the less you pay in total. - Borrowing - If you know you will start that new job soon or you have money coming your way soon, consider borrowing from family and friends.
If you don't see the money coming soon, consider other options. - Refinance your home - If you have equity in your home, you can consider refinancing it and using that cash to pay down the taxes owed.
This is a good option to get a low interest rate on the borrowed cash. - Put on Credit Card - This option is available, use carefully though because of the high interest rates credit cards carry.
Only use this method if you know you can pay off quickly or you know you won't get charged too much interest.
If you will be carrying the balance, an installment agreement would be a better choice for you.
They will be able to handle the IRS dealings for you and will likely be able to figure out the best solution for your particular tax situation.
In summary, if you can't pay your taxes owed, be sure to file them first, then figure out a solution to paying second.
Remember that the IRS is willing to work with individuals on taxes they cannot pay.