If you don’t have enough money to pay what you owe the IRS, you have a few options to work with. Whatever you do, don’t ignore the letters from the IRS, and don’t let your back tax problem go unaddressed—the IRS has a great deal of power when it comes to recovering money they think is theirs. They can garnish your wages, levy your bank accounts, put a lien on your home and even seize assets.
Here are some steps you can take if you find yourself unable to pay your taxes. We strongly recommend you get in touch with an accountant in Jamestown, ND to work through these steps and avoid harsh penalties and interest.
File your tax returns
Even if you do not have any hope of being able to pay your taxes, you should still file your income tax returns. Whatever penalties exist for not paying your taxes, the penalties for not filing are even larger. The IRS will remove penalties for not filing and not paying, but you have to have a good reason. You can request to have your penalties reduced or eliminated altogether. Also remember that when you file for an extension, you get more time to file, meaning you have an unchanged payment date.
Revisit W-4 withholdings
If your employer withholds any money from your salary to pay your taxes, you won’t have to worry about paying anything extra from that income source. If you do owe more, it’s a sign that your withholding exemptions are incorrectly reported on your W-4 form. To make sure that you don’t get into tax trouble repeatedly, you should make sure your W-4 form is correct and get advice from a tax professional about the kind of withholdings you should make.
Make partial payments
If you can’t afford to pay everything you owe, you should still pay whatever you can. You might have to pay interest and penalty charges, but they’ll be smaller than what you’d be hit with if you didn’t pay anything at all.
Negotiate with the IRS
If you can’t pay, you still have resolution options available, assuming you qualify. These options include a payment plan or an offer in compromise.
When the IRS grants a payment plan, you can pay your back taxes in monthly installments. If you owe less than $10,000, you shouldn’t have much of a problem applying for a payment plan. However, for larger amounts it can be a bit more difficult to get the IRS to agree to a repayment plan.
If you have a financial hardship that is so severe that there is no possibility of repayment, there is a program called the Offer in Compromise. To qualify, you must be able to prove to the IRS you will never be able to pay back the full amount.
Be careful whom you trust when it comes to your taxes—there are a lot of so-called “professionals” out there who know how desperate people can get if they are unable to afford their taxes. Instead, work with a trusted expert who will take the time to explain your options to you and permanently resolve your tax problem. Contact a professional accountant in Jamestown, ND at Craig S. Hanson, CPA today to learn more.