13 Apr What to Do If You Can’t Pay Your Taxes
Many people dread filing their taxes, because they’re afraid of how much they’re going to owe. Oftentimes, this expense, added on top of your regular bills, can stretch an individual or a family to their financial limits. What if you really can’t afford to pay your taxes? What can you do?
First off, don’t just ignore the expense and hope it will go away–it won’t. Rather, follow these 3 steps to minimize fees and other repercussions associated with not paying the taxes you owe, and speak to one of our accountants in Provo for additional help.
Step 1: File Your Taxes
If you learn before filing that you are going to owe on your taxes, don’t put off filing. Failing to file your taxes by the deadline results in additional fees and penalties, which is one thing that you don’t want. So, regardless of how much you are going to owe on your taxes, always make sure that you file them on time.
Step 2: Pay What You Can
Late payment fees are accrued based on a percentage of what you owe; every month the taxes go unpaid, 0.5% of the total debt is added to what you owe. For example, if you owe $5,000 and you go 4 months without paying it, you will accrue $100 in late payment fees. But if you are able to pay off half of the taxes you owe when you file, you will only accrue $50 in late fees over the same amount of time.
And if you don’t pay off your tax debt in a year, you will receive an additional penalty of 5% on the unpaid amount. So pay off as much of your tax debt as you can upfront to help minimize accrued penalties.
Step 3: Call the IRS and Local Tax Office
The IRS and your local tax office both like to know that you are being proactive and making a sincere effort to pay off your taxes. So once you’ve filed and have paid as much as you possibly can, call them to discuss payment options. Oftentimes, if you’ve filed before calling in, the IRS is willing to put you on an installment plan to help pay off the debt with minimal penalties. You can also apply for an installment plan online at irs.gov/payments, or by having one of our accountants in Provo file Form 9465 on your behalf.
Being unable to afford your tax payment is a stressful experience. But if you find yourself in this situation, know that there are ways to pay off the debt over time, with minimal fees and penalties. If you’re worried about being unable to pay your taxes, contact The Accounting Guys for assistance with filing your taxes and applying for an IRS installment plan.