The IRS is more powerful than you think. It comes down heavily on people who do not pay their taxes. From property attachment to a jail sentence, tax defaulters can face the IRS’s wrath in several different forms. But what if a person who owes taxes cannot pay due to temporary financial hardship? Will the IRS still wreak havoc on their life? Probably not. If you do not have enough funds to pay your taxes, don’t panic, you’re not alone. Every year some 5 million taxpayers need a payment alternative. Your inability to pay taxes you owe is not the end of the world. Here are some tips to avoid IRS trouble.
File Your Return on Time
Your inability to pay taxes is not a good enough reason to not file your return by the filing deadline. There are two types of tax penalties: one for filing returns late and the other for delay in paying your outstanding taxes on time. The penalty for late payment is lower than the fine for delay in filing return. If you cannot pay your full outstanding taxes on time, try to pay as much as you can. This will lower your interest obligation and you will also have to pay a much lesser penalty later.
Ask for an Extension
You can call the IRS, asking them to provide an extension for up to 120 days to pay your tax bill.
Avail a Payment Plan
The IRS has several payment plans for taxpayers who do not have enough funds to pay in full. A payment plan will allow you to spread out your IRS payments, providing you some much-needed breathing space. Payment plans range from simple and streamlined payment agreements that can be set up online to complicated agreements that require an in-person visit to the IRS office for document submission. If you cannot decide which payment plan is the best for you, consult a taxation expert who offers accounting services in Santa Rosa.
Check If You are Eligible for Offer in Compromise
If the IRS decides that there is no way it can collect the full outstanding amount from a taxpayer, it can use an Offer in Compromise. An OIC allows the taxpayer to settle their unpaid taxes for a much lesser amount. Usually only those taxpayers who do not have any significant assets or can prove that paying the full outstanding amount will create a financial hardship for them qualify.
Prove Financial Hardship
If you can prove that you are experiencing financial hardship and cannot pay the IRS now, the IRS will not ask you to pay till your circumstances improve. This is known as Currently Not Collectible status. Generally, people who do not have any assets (other than the ones they are using to pay their living expenses) qualify.
Unable to pay your taxes in full? Let an expert from Virtual Jeannie Bookkeeping Services Inc. help you explore your options. We offer top-notch bookkeeping services in Santa Rosa. We take the guesswork out of bookkeeping. Our clientele includes businesses of all shapes and sizes. To talk to a bookkeeping expert, call us at (707) 664-1425.