The consequences of not paying your IRS taxes can be severe. Once you have accrued back taxes, they will not go away on their own. In fact, they will continue to grow larger as time goes on, due to the addition of interest and penalties.
This can become unmanageable, and put a significant strain on your finances and peace of mind.
If you receive notices from the IRS about unpaid taxes, it is crucial that you take action immediately. Determine how much you owe, and start exploring payment options or seeking out a back taxes relief plan.
If you fail to respond or take any action, you may face liens, wage garnishment, property seizure, or even criminal charges.
If you think you will have trouble paying your taxes this year, it is important to know what options are available to help you. In this article we will explore your options.
Tax Payments Are Due On April 15, And Many People May Not Be Able To Pay
If you find that you can’t pay your taxes, it’s important to file for an extension as soon as possible. This will give you additional time to come up with the money you need to pay your taxes.
If you cannot file your tax return by the April 15 deadline, you can request a 6-month extension from the IRS. Do it immediately and this will give you until October 15 to file your return.
To get the extension, you must file Form 4868.
If you don’t qualify for an extension, there are other ways that you can come up with the money.
One possibility is to use credit cards or borrow from family members. You could also sell assets like your car or jewelry.
If none of these things will work for you, the IRS has a number of programs that can help you pay your tax bill.
You can learn more about these programs on the IRS website
What Are The Consequences Of Not Paying The IRS?
If you don’t pay your taxes, you will end up owing money to the IRS. The longer you wait to pay, the more money you will owe because of interest and penalties. This can have a negative impact on your financial situation and your overall well-being.
The interest rate on unpaid taxes is currently set at 6%, and the late payment penalty is 0.5% of the unpaid tax amount per month, up to a maximum of 25%.
If you don’t pay the IRS, they may file a notice of federal tax lien, which is a public record that can damage your credit score and make it difficult to get loans or credit in the future.
Other consequences that can come from not paying the IRS include wage garnishment, seizure of assets, and even jail time.
If I can’t pay my taxes, what options do the IRS Offer?
The IRS offers a few options for taxpayers who are unable to pay their taxes.
These include a Payment Plan, the Offer in Compromise, temporary delay in collection, and the Currently Not Collectible status. Each of these has different requirements and can help you in different ways.
Setting up a payment plan with the IRS will allow you to make smaller payments over time to gradually pay off their tax debt.
If you owe more than $50,000 as an individual taxpayer, or more than $25,000 as a business, you must submit a financial statement along with your request for a Payment Plan.
There are two payment plans available;
The first is a Short-term Payment Plan that will allow you to make monthly payments toward your tax debt for up to 180 days. There is no user fee for this.
The other is a Long-term Payment Plan for those who need more time to pay their taxes. With an installment agreement, as long as you have filed all required returns and owe over $25,000 in combined tax, penalties, and interest, you can make payments over a longer period of time. It is cheaper to apply online and there is a $130 fee. If you apply by phone, mail, or in-person it costs $225.
A Temporary delay in collection can happen if the IRS determines that you cannot pay your tax debt. The IRS will not take any action to collect the debt for a certain period of time. This can give you time to get your finances in order and make arrangements to pay the debt. They may report your account as Currently Not Collectible.
An Offer in Compromise allows taxpayers to settle their tax debt for less than the full amount they owe. This is especially true if you can prove that you made a good-faith effort to pay your taxes and just couldn’t afford to do so but who wants to resolve their debt in a timely manner. Use the Offer in Compromise Pre-Qualifier to see if it will work for you.
Currently Not Collectible is a status that the IRS assigns to taxpayers who are unable to pay their tax debt. This status allows the taxpayer to temporarily postpone their tax payments until their financial situation improves.
The IRS will review your case and make a decision based on what they think is fair. In some cases, the IRS may agree to accept less than the full amount that you owe to avoid garnishing your wages. They will also consider whether it makes financial sense for them to collect money from you at all. If they decide that they won’t collect any money from you anymore, they will release any liens or debts that they have on your assets.
What Happens if You Don’t File Your Taxes?
If you don’t file your taxes, you may be subject to penalties and interest. The IRS may also file a return on your behalf, which may not be in your best interest.
If you don’t file your taxes on time, the IRS will automatically charge a penalty for the amount owed.
Failure to file penalties:
- First month: 5 percent of tax liability
- Second month: 5 percent of tax liability, (after 60 days of being late, the minimum failure to file penalty is $435 or 100 percent of your tax liability, whichever is less)
- Third month: 5 percent of tax liability
- Fourth month: 5 percent of tax liability
- Fifth month: 5 percent of tax liability
In some cases, the government will forgive the penalty, such as in the case of natural disasters or military service. But, if you don’t fall under one of those exemptions, you can expect to pay the penalty. In rare cases, the IRS may also recommend jail time for people who fail to file their taxes, but this is rare.
If I’ve Faced a Hardship, Do I Have to Pay Taxes?
The answer to this question depends on the nature of the hardship you have faced.
If you have faced financial hardship due to a job loss, medical bills, or other unexpected expenses, you may be able to qualify for a tax exemption or deduction.
However, if your hardship is due to a voluntary decision, such as choosing to quit your job, you will not be able to qualify for a tax exemption or deduction.
If I Can’t Pay My Taxes, Should I Hire a Tax relief professional
If you can’t pay your taxes, you may want to consider hiring a tax relief professional. Tax relief professionals have an expertise in dealing with back taxes, which could be a huge benefit if you’re having trouble getting your finances back in order.
A tax relief professional can help you negotiate with the IRS and potentially reduce your tax liability.
Of course, there are certain red flags to take note of when considering whether to call on tax relief professionals.
At the end of the day, it’s up to you to decide if they’re worth their fee; so you’ll need to weigh out what each expert offers and how beneficial they might be for your specific situation.
Find Help With A Professional Tax Relief Company
If you know that you can’t make your payments, the IRS has a solution in place.
The IRS will allow you to take care of your tax debt over time by agreeing to extend the due date for your taxes. In most cases, this is a very good option.
But, if you’re struggling to negotiate with the IRS on your own, consider hiring a tax relief service provider. These firms usually have a team of experts who can help you tackle your back taxes immediately. Plus, most companies offer their services remotely, so you won’t have to waste time commuting to their office.
Be careful though, not all companies are trustworthy.
You see it on the news all the time, and it’s no secret that IRS scams are costing people a fortune. When you need tax relief, it’s important to do your research and choose a reputable company. Some companies are outright corrupt, and you don’t want to fall victim to their scams.
