Category: Filing Taxes

What Happens If You Can't Pay Your Tax Bill?

4/20/2021

Concerned if you'll be able to pay your tax bill this year? Today we are going to be talking about what to do if you're unable to pay your taxes on time!

With the original date of tax season come and gone, and with just around a month left before the new tax day of May 17th is here, there is still much to be done and much to be considered. While you do still have time to get your taxes in and prepared, you are cutting it down to the wire, which can cause a huge amount of stress and can lead to you making mistakes on your taxes in a rush to get everything finished. These mistakes can lead to a halt in getting your refund back and it could land you with a pretty sizable fine. The best way to avoid all of this is to work with tax preparers, like all of us at Hoods! However, this time of year when we are extremely close to tax day being upon us, we are just as busy as you could imagine. To help us help you, if you're still looking for us to help you with your taxes, please contact us as soon as possible!

With tax season on the minds of so many Americans this year, we have to stop and realize the effects this past year put on our finances and taxes. We know and understand the potential strain and confusion that you've gone through due to the pandemic; the loss of your job, being put on furlough, unemployment, returning to the working world again, making sure you've received all of the stimulus payments available to you, and now we have landed on a brand new tax day. While the most recent economic relief plan that the president released, which included our third stimulus check and the forgiveness of a big chunk of unemployment funds, taxes are still going to come calling and many will still have to pay a decent amount of money. Not only were many American hit with a surprising tax bill due to unemployment, but some were also bumped into new tax brackets, some dealt with self-employment taxes after starting their own business to make it through the last year, and others are dealing with multiple I9s and W2s from working multiple jobs to get through this year. This and many other new stressful situations have made this tax season one of the most unique and difficult to date for the average taxpayer. We've been discussing a lot of tips and how-tos to deal with this year's tax season, but today we are going to be changing the conversation a little and will be talking about some of the more challenging issues some Americans could be going through; what happens when you are unable to pay your tax bill?

First and foremost, take a deep breath and don't panic. The IRS uses the same sentiment on their website when you ask this question. If the IRS is telling you not to panic, then you are going to be okay. If you are unable to pay the full amount it is recommended by the IRS that you should still file your return by the deadline and pay as much as you can. This will help you avoid penalties and interest.
Don't waste any time, go right to the source. The IRS has published a number to contact them directly to discuss payment options with them if you are unable to pay your tax bill. Please call them at 800-829-1040.
The IRS may also be able to provide some kind of relief to you if you are honest and reach out right away and explain your financial situation. Not filing isn't an option.
You might be able to receive relief in the form of getting a short-term extension to pay, an installment agreement, or an offer in compromise.
You might also have the option of delaying collection by reporting your account as currently not collectible until you pay in full.
When you do follow through with this process, the IRS might in some cases, be able to wave any penalties that might arrive. Please note that they will not be able to wave any interest charges that will accrue on unpaid tax bills.
This year alone, 125 million Americans received a tax refund, leaving 43 million Americans that broke even or were left owing money. Know that you are not alone in your stress and worry as you read this.
When you chose to do a monthly installment plan, you will fill out an online payment agreement application after you file your return.
You can also send in the 9465 tax form when you mail in your taxes. This form will let the IRS know that you are interested in a payment or installment plan. This will give you 72 months to pay your bill. You can only use this option if you owe $50,000 or less in taxes.
Please note that you cannot use a payment plan or installment plan unless you are completely caught up with your taxes. If you haven't done them in a few years and you decide to try and get a payment plan, it will be denied,
When you request an offer in compromise after you explain to the IRS why you cannot pay, you will make them an offer on what you feel like you can reasonably pay. If they accept your offer, then you will only have to pay what you've offered. It is a compromise that allows you to settle your debt for less than the total amount that you owe.
You do have the option to file for an extension. However, remember that when you do this it will only help push back the date of when you need to file your taxes and has nothing to do with the money you owe.
If you're still at a loss on what to do, you can send in a little money every month the reduce penalties and interest that will build up down the road. This is also a boost in your direction as it will make you look good in the eyes of the IRS.
Make sure you are utilizing all of your deductions and tax credits that can be applied to your tax bill, this might drastically bring down the amount that you'll end up owing.
Asking for an extension to pay your taxes can give you up to 120 days to pay the IRS in full.
The current interest rate on payment plans is only 3%, which isn't terrible.
Know that if you do choose to do an offer in compromise (OIC) you will have to be very open and honest about your finances and your personal life to prove that you indeed are unable to pay. While this can be a saving grace for many people, this can also be a long-drawn-out process than the other examples of help and action that we've talked about today.
You will have the option to pay your taxes with your credit card. Discover, Visa, American Express, and MasterCard are all accepted by the IRS.
Remember that while it is not a fun or pleasant experience to owe a tax balance and not being able to pay it, in reality, it only becomes a true problem if you choose to do nothing about it and choose not to reach out and talk to the IRS.

As we've mentioned before, not filing is never an option. File your taxes and you will be able to take care of the rest. The key to this situation is to be proactive about it. If you stay silent and choose to do nothing, that's when it gets messy. If you need help or have any questions, please don't hesitate to reach out. We will make it to and through this tax season in one piece and together! Remember, if you are looking for the best accounting services in Goose Creek, the best tax preparation in Goose Creek, business consulting in Goose Creek, bookkeeping in Goose Creek, or payroll services in Goose Creek, we are here for you! Our phone lines and inboxes are waiting for you. Don't hesitate! Please stay safe, everyone. We will see you soon!

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