It’s the final two weeks of the tax season and millions of taxpayers are scurrying to get their taxes done before the deadline. Unfortunately, some of these last-minute filers will find out they owe Uncle Sam. If you have a tax bill for 2016 that you can’t quite pay, you do have options.
Even if you can’t pay in full, I’d highly encourage you to file your return on time. This way, you avoid the late filing penalties that can be added on to your tax liability, which can add up to 25% of your balance due. Also, try to pay as much as you possibly can with your return. If you are going to be filing an extension, pay as much as you can with your extension (remember, extensions are extension of time to file, not an extension of time to pay).
The IRS is currently charging a 4% annual interest rate, compounded daily, on all tax debts. On top of that, you will be subject to a failure to pay penalty, which will further increase your tax debt.
It may be worthwhile to consider using credits cards or a loan to pay your tax bill. When you consider the extensive penalties the IRS charges, your credit card interest rate may actually be quite a bit lower.
If you absolutely cannot pay your tax bill this year, then use either the online payment agreement request system at irs.gov, or complete Form 9465 to request a payment plan. You are not required to wait until the IRS bills you before requesting a payment plan.
The most important thing to remember is that, in order to avoid the wrath of IRS Collections, it’s in your best interest to be proactive about managing your tax debt. Don’t wait for the IRS to come to you: Take the high road, and address it head on.
If your tax debt is simply too large for you to pay in any reasonable amount of time, it’s worth considering your other options. Our company provides complete guidance for resolving your back tax liabilities, particularly if your situation is more complex, such as multiple years of tax debt to address.
Don’t give the IRS the upper hand. Stay on top of your tax situation and address the issue long before the government starts coming after you.