So what do you do? Here are 4 ideas:
1. File Your Tax Return Anyway and Pay the Maximum Amount You Can
The Internal Revenue Service (IRS) instructs all US citizens to fill out their tax returns and file them on time. You need to do this even if you can’t pay all the tax money you owe immediately. You’ll want to pay the maximum amount you’re able to come up with. Making a partial payment is preferable to making no payment. Making a partial payment will reduce the amount you owe, which will be subject to incurring penalties and interest.
2. Pay the IRS With a Credit Card
Perhaps you have available credit on a credit card. If so, you can use your credit card to pay your tax bill. According to CBSNews.com, this can be an expensive option, because you’ll have to pay a percentage of what you owe as an additional fee. Even considering the fee, it may be preferable to get your tax bill taken care of on time, assuming you’ll be able to repay the credit card bills as soon as possible.
3. Request an Extension or Make a Payment Plan
The IRS will allow you to request an additional 60-120 days to pay your bill. One possible option is to use their Online Payment Agreement application. Another option is to call them at 800-829-1040. If you’ll be later than 120 days in making the payment, it may be preferable to set up an installment payment plan.
4. Make an Offer in Compromise
If you have absolutely no hope of paying the amount you owe, an offer in compromise may be a possibility. This is an offer to settle your tax bill for less money than you owe.
Be aware that the IRS is likely to reject your offer in compromise. The IRS does not accept the majority of the offers received by the agency. Your offer will most likely be rejected if you own more assets than you owe in taxes –because your assets could be sold to pay your tax bill. However, your offer has a possibility of being accepted if your expenses are greater than your income, you don’t have enough assets to cover your bill, and your future earning potential is so low that you’d be unlikely to cover your bill in the future. You can visit this page at the IRS website to see if you might qualify for an offer in compromise.
Whichever way you decide to handle it, you’ll definitely want to make arrangements to pay your taxes as soon as you can. Unpaid taxes can result in many unpleasant circumstances. For example, the IRS can file a tax lien against you, which can adversely affect your ability to sell your property and conduct business. It can also negatively affect your credit rating. You’re also likely to accrue penalties and interest on the money you owe, so the amount you owe the IRS will grow significantly while the debt remains outstanding. These are circumstances you obviously want to avoid – so do your best to raise the money for paying off your tax debt as soon as possible.
This content is sponsored by Andrej Kovacevic.