What to Do When You Can’t Pay Your Tax
Most people don’t enjoy writing checks for taxes. The feeling can go from bad to worse if you find out that you owe more than you can pay. There are steps to take if you find yourself in this unpleasant circumstance that can ease some of the stress and avoid bigger headaches down the road
File your returns on time. The temptation is to wait until you have the money before you file. However, waiting will only compound your problem as the tax balance you owe may be compounded with interest and penalties.
Pay what you can. If you can’t pay the entire balance, then pay what you can at the time of filing. This will help minimize penalties and interest.
Consider any possible financing options available including home equity loans or credit cards. If you do look to your credit cards be sure the card rates and fees are lower than what the IRS would charge.
Request an installment plan. The IRS can work with you to create a plan for paying your outstanding taxes.
If you have exhausted all of the above items, consider making an offer in compromise to settle your outstanding debt. In certain cases, the IRS may settle for less than the amount owed in order to avoid getting nothing.
If you find yourself in trouble, don’t run away! If you would like to discuss any of these options for your situation, give us a call today.
Sam Clegg, CPA