Every tax season lots of people are looking forward to a healthy tax return check. But some individuals might be surprised to see that they will not receive a tax return. In fact, they will owe money to the Internal Revenue Service (IRS). While their first impulse may be to run and hide in a cave, because they cannot pay taxes owed, that is not the best option. The IRS recommends taking a few steps if you find yourself in this situation.
The first thing the IRS recommends is actually properly filing your taxes by the deadline and applying as large of a payment towards your taxes as possible. This is because late filing incurs a penalty, and late tax payments accrue interest plus a late payment penalty.
In order to avoid interest on late taxes, you just need to pay as much as you can before the deadline.
The next step you should take if you can’t pay your taxes is to give the IRS a call (1-800-829-1040) to see if they can offer any assistance. There are various programs and exemptions that might help you defer your payments until you are able to pay your taxes.
The agency might have some relief programs available in the form of a short-term extension on payment, an option to break your tax payment into smaller increments, or “an offer in compromise.” They also may be able to report your account as “not collectible,” thereby delaying collection until you can pay your taxes.
In some cases, the IRS cannot waive any penalties. But in all cases, you will accrue interest on your late payment, so you want to pay as quickly as possible.
One creative solution to finding funds to pay your taxes is to sell some things. Do you have a basement of storage or a garage full of things you rarely use? How about that treadmill you bought last year that you’re currently using as a clothes hanger?
Selling or consigning items you no longer or rarely use can generate some quick income you could use to pay down your taxes. You could sell them to a shop that accepts consignments, hold a yard sale, or even list them on websites or Facebook groups specifically made for selling items locally.
Another creative solution is a back to the basics approach. Many adults who are currently working full-time but need a little more cash in their pocket pick up evening or weekend jobs. Many times, these individuals who are working to pay down debt or save for an upcoming life change (baby on the way or child nearing college) can make a significant amount of extra money for relatively few hours by simply asking.
Sometimes employers are more than willing to offer extra hours to employees who need more time. Neighbors are more willing to help a friend looking to get out of debt in exchange for some yard work. And pizza delivery jobs are plenty while offering flexible hours.
If you have tried everything but still find that you do need to call the IRS to notify them you are unable to pay (or see if there is any assistance available), you will want to be sure you have the necessary paperwork at hand so that you are able to fully answer any questions they may have. The IRS might ask you for the following information found on the following documents: pay stubs, lease or rental agreements, mortgage statements, car lease/loan, utilities.
You will also want to be sure that if there are any other financial obligations you may have (such as child support or alimony), that you have that information nearby as well.
It is our hope that you find you will be receiving a refund on your taxes this year, but if not, don’t panic. You have plenty of avenues available that could relieve a portion of the tax burden you face if you can’t pay your taxes.
If this happens to you, we want to make sure that you are exploring every possible opportunity for tax payment relief and that your rights regarding taxes are being upheld. Do not hesitate to reach out to an experienced tax attorney specialized in working with the IRS if you need additional information if you can’t pay your taxes.
Finally, if you do find that you owe a significant amount of taxes this year, one of the best things you can do is to prevent it from happening again next year. Is your employer not withholding enough taxes from your check? Have them adjust your paycheck so that you can pay your tax burden a little bit at a time. If you are self employed, be sure to file your estimated taxes at least quarterly.