What to do if you owe the IRS taxes?

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.

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20 comments Add your comment

Tara

April 13th, 2010
12:00 pm

Offer and Compromise is the biggest joke in the world. You have a better chance of winning the million dollar lottery…

Mamaj

April 13th, 2010
12:22 pm

I’d like to enforce the same tactless rules for paying money you simply don’t have, to the IRS that they apply to us. After 3 years, I am STILL trying to get the IRS to send me my refund of $3500 that they are “investigating”.I have no idea what they are investigating, but 3 years is more than enough time to find out that a lowly average Jane is up to.

Marinemom

April 13th, 2010
4:41 pm

I have a payment arrangement with the IRS. However, the interest and penalites I pay every month are more than the payments I make. They did take my refund for 2009 to pay towards the debt, which is fine with me. I’ll never get this paid for with what they charge back each month. It’s almost as bad as repaying a loanshark.

4

April 13th, 2010
5:29 pm

“You’ll still pay 4 interest on the balance.”

Rana Cash

April 13th, 2010
5:42 pm

@ 4: should be 4 percent. Thanks for the catch.

LD

April 14th, 2010
8:25 am

FAIR TAX NOW !

Ham Sandwich for lunch

April 14th, 2010
8:54 am

Two years in a row the IRS screwed up my return. One year, I did the e file. I got confirmation that the e file was submitted along with my payment, yet 6 months later, they start hounding me for my return. They accepted the payment with no problem, yet too their time to notify me of a problem with the return.

Last year, they waited until July to tell me my return was incomplete and claimed I owed an additional $400. I contacted them and was told all I need was to resend my deductions. How they got lost, I don’t know as they had all the other documents. I faxed a copy of the deductions. In October, I get mails indicating I still owe $400. I had a confirmation that the fax transmitted, yet they somehow did not get my fax…..I sent it a second time……I never heard back. I expect by June, they will find a way to claim I still owe them money. Of course, there is still 2009’s return to wonder how they will screw that up.

Don't mess with the IRS

April 14th, 2010
2:41 pm

Remember that it was the IRS that put Al Capone behind bars, not the police or the FBI.

JD

April 14th, 2010
3:40 pm

If you work hard your reward is to pay the tax to give to the bums. LOL. True story.

Taxes Due April 15 « Apto Real Time

April 14th, 2010
3:45 pm

[...] What to do if you owe the IRS taxes. [...]

reallygroovy7777

April 15th, 2010
4:05 am

what if you owe ga tax ? how long do you have if you oew georgia?

Tax Day help available | The Biz Beat

April 15th, 2010
6:38 am

[...] What to do if you owe money to the IRS [...]

Andy in Blairsville

April 15th, 2010
7:10 am

I so excited about putting my $9400 in the mail today, I think I might do cartwheels.

[sarcasm]

Redwood

April 15th, 2010
7:56 am

@Andy in Blairsville
Just be happy in knowing it will go to fund our little friend Israel & its myriad of crimes.

Redwood

April 15th, 2010
7:59 am

@LD
This “Fair Tax” idea is a lot of delusional silliness. Replacing one tax system with another wouldn’t make much difference. They will get their pound of flesh regardless of the method. Your types are just barking at the moon.

I paid my taxes

April 15th, 2010
8:08 am

How do some people get by without filing a tax return? I know a man who said he has not filed in over 10 years. I saw a news article recently that verified IRS knows there are people who don’t pay. It’s not fair that some pay in every year and others owe thousands of $$ but get them reduced by thousands and only “pay a fraction of what they owe?”

KevinM

April 15th, 2010
8:26 am

Redwood, far better to make all of us pay taxes than just over 1/2 of us, wouldn’t it? That’s the Fair tax concept. Learn a little about it before talking delusional.
Everyone should pay, no excuses. Balance the level of play here.
I sure don’t see it happening, but it makes more sense, which definitely shuts down most of the government’s justification for pulling $$ out of all of our pockets.

Everyone should pay

April 15th, 2010
9:20 am

My wife and I made $6000 too much last year and now we have to pay an extra $7000 in taxes. That’s the problem with these tax brackets. Sure wish I was one of the 47% of Americans not paying ANY income tax this year. I SUPPORT THE FAIR TAX!

Don

April 15th, 2010
11:16 am

If you were.one of the 47%, you wouln’t have your house, your cars, or your standard of living.

What brackets did you jump where the additional tax was larger than the additional income? Without that info, I’ll just say that’s hard to believe.

Everyone should pay

April 16th, 2010
10:35 am

The extra $7000 came from not enough being withheld from our checks I always try to keep it close so I end up paying less than $500 on April 15th. The higher tax bracket bumped up what we owe, so not enough was withheld. As for my standard of living, I live within my means. My truck is 7 years old, wife’s van is 5. Have a 18 year old Honda to help save gas. We live in an average subdivision with our 4 kids. Don’t try to live like a rock (or rap) star and even the 47% of non tax payers could have a good life.