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Balancing Small Business

Poe's Accounting Service's blog for helping small businesses get more out of their financial accounting.

5 Actions You Can Take if You Can't Pay Your Taxes

Reformation Productions Agency - Tuesday, September 26, 2017

Many people are intimidated by the Internal Revenue Service (IRS), which is why they get duped by fraudsters threatening them with imprisonment if they don’t pay their taxes immediately. They forget or may be unaware that they have the right to be informed of IRS decisions about their tax accounts and to receive clarification of the outcomes. They’re also entitled to courteous assistance and clear explanations of issues and queries. While it’s always preferable to pay as quickly as possible to avoid penalties and interest, the IRS does offer various options to assist people who are unable to pay part or all of their taxes. Here are 5 actions to take if you find yourself in that situation:

 

 

1.Ensure that you still file your return by the deadline and pay as much as you’re able to.  

Procrastination or avoidance will only add to your stress. Filing on time demonstrates good faith and may reduce additional charges such as a failure-to-pay penalties.

 

 

2.Contact the IRS to discuss various alternatives.

They may be able to provide some relief through the following options:

 - A short-term extension to pay – up to 120 days

 - An installment agreement allowing you to make monthly payments

 - An offer in compromise, which resolves a taxpayer’s liability in the event of economic hardship or other special circumstances by payment of an agreed-upon reduced amount

 - A delay of the due date by flagging your account as not currently collectible

 - A waiver of penalties

 

 

If your circumstances change down the road and you’re unable to make the payments required under the installment agreement or offer in compromise, contact the IRS again as soon as possible. You may be able to reduce the monthly payment to reflect your current financial condition.

 

 

3.Collect and retain all documentation proving you had reasonable cause to not pay or delay.

Examples include letters from physicians or proof you were impacted by a natural disaster like a flood or hurricane.

 

4.Consider paying by credit card or through a home equity loan.

You should consider financing the full payment of your tax liability through loans, such as a home equity loan from a financial institution, or by using a credit card. The interest rate and any applicable fees charged by a bank or credit card company are usually lower than the combination of interest and penalties imposed by the IRS.

 

 

5.Find a qualified tax preparer.

Don’t assume that using the services of a tax professional is a luxury only the wealthy can afford. We can assist you by

 - Negotiating with the IRS on your behalf

 - Finding savings like credits or deductions that could reduce your tax bill

 - Dealing with your tax bill quickly to alleviate stress and attain a swift resolution

 - Assessing your whole financial situation (Significant life events like a change in marital status, loss of employment or home ownership all impact your taxes)

 

In many cases, our fees are lower than the interest or other penalties you’d incur by delaying filing your tax return. And at the end of the day, peace of mind is priceless.

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