No matter how well-intentioned, there are those who simply will not be able to afford to meet their federal tax obligation this year. The April 15 filing deadline is days away. While more than a few circled this time of year in anticipation of a tax refund, others have dreaded it, knowing they’ll owe the government money — often times money they don’t have.
What do you do if you can’t pay?
File anyway: Whether you owe money or not, you should still file your taxes or be among the Internal Revenue Service’s estimated 300,000 Georgians filing an extension by Thursday’s deadline. The penalty for filing late is no less than 5 percent per month of the tax due, up to 25 percent. An extension for time to file is not an extension to pay. However, the late-filing penalty is 10 times greater than the late-payment penalty.
Pay what you can: If you owe money, pay as much as you can when you file. If you file and pay 90 percent of your tax liability, you will not be fined with a failure-to-penalty as long as the remainder is paid by the extension deadline.
Don’t run and hide: If you don’t want to get on the IRS’ bad side, then don’t avoid them. Ignoring letters, dodging phone calls and willingly walking away from your tax obligation will get you nowhere fast.
“Communicate with us,” said IRS spokesperson Mark Green. “Let us know what’s going on. The process goes a lot smoother if you communicate.”
If you don’t, the results, like property liens and wage garnishments, can be brutal.
“Those are typically last resorts,” said Corey Sutton, district manager for H&R Block. “But, once that action starts, it’s very difficult to reverse that.”
Work out a payment agreement: The IRS will work out a payment agreement in most instances. If you owe less than $25,000, you can sign up for an online payment plan. It will cost you a one-time fee of $52; the cost is $105 if the payments are not made electronically. You’ll still pay 4 percent interest on the balance. To qualify for the installment plan or a short-term extension, you must have filed the prior year’s tax return and paid all your previous tax liabilities.
Offers In Compromise: The Offers in Compromise allows the taxpayer and the IRS to settle for less than the taxpayer owes. This year, the compromise is not only based on past income, but on current and potential income as well. That gives the IRS more room to work with the recently unemployed or those having economic struggles.
For more tax-related stories, click here.