I Can't Afford My Taxes! Now What?
Tax time can be stressful, particularly if you don’t have the money to pay what you owe the IRS by April 15th. The good news, there are several options to consider if you or someone you know is in this situation. So before the IRS garnishes your wages, consider these options that may help.
1. Don't Skip Filing:
If you have discovered that you will own the IRS but know you simply can't afford your bill, do not stop the process of filing. The penalty for not filing your taxes is significantly worse than the penalty for failing to timely pay your taxes. The penalty is estimated at 5% of the tax owed per month it is late, but no more than 25%.
2. Request an Extension:
If you can’t file a tax return, at least extend it. A properly filed extension creates a new filing deadline of October 15 and means you won’t owe a failure to file penalty.
3. Establish a Payment Plan:
If you're financially unable to pay your tax debt immediately, you can make arrangements with the IRS for monthly payments through installment agreements. As long as you pay your tax debt in full, you can eliminate your payment of penalties or interest.
4. Pay by Credit or Debit Card:
Some taxpayers opt to pay by credit or debit card. The IRS accepts all major cards (American Express, Discover, MasterCard, or Visa).The IRS doesn’t charge a fee for credit card payments but the processing companies do: fees for credit cards range from 1.87% to 2.25% (minimum fees apply).
5. Offer of Compromise:
If you owe so much that there's no way you'll ever be able to pay it, the IRS may accept less than the full amount through a program called Offer in Compromise.
You'll have to provide a complete personal financial statement including everything you own of value, all the debts you owe, your income, and the amount you're prepared to pay immediately in order to settle your account.
6. Get Expert Advice:
If you know you can't pay your tax bill on time, call Jeanine Hemingway CPA. We can help assess all your options given your unique situation. But whatever you do, don’t ignore your situation.
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Jeanine Hemingway,CPA, PC