Sunday, April 24, 2011

What happens if I cannot pay the taxes?

You have just finished preparing your tax return and notice that you owe Uncle Sam a hefty sum, but can not afford to pay. You're going to jail? Probably not. Can make the realization that you can't afford to pay taxes feel uncomfortable, but don't worry, there are some actions you can take to remedy the situation.

Even if you don't have enough money to pay the taxes you owe, you need to send in your return within the period of deposit. While there is a bit of a penalty for late payment, the penalty for filing late is much more serious. So, no matter what the situation is, file taxes on time.

If you have $ 100 or $ 10,000, the first thing you should do is try to find possible sources to get this money. Consider the options available to you as the equity in your home, credit cards, savings, or cashing out paid time off to work. There are a lot of potential sources of money, but some may end up costing even more in additional interest.

While it is better to pay the taxes owed in full and on time, there are times when you just need to get your next paycheck or wait a couple of weeks until the money is available. If you filed your taxes on time, the IRS will send you a letter in the mail detailing how much you owe plus any further interest.

If you know that you have the money shortly after the term of deposit can have meaning only to wait until you send the invoice and pay it later, as the interest you pay will be relatively low compared to money with another source of funding. This certainly should not be a long-term solution and your goal should be to pay the IRS as soon as possible.

The Government, just like anyone else, prefer to have money for a period of time instead of nothing at all, so they have a floor installment is available when you can't pay in full. To request an installment plan, you should use the form 9465. You can also set this plan to make a direct debit from a bank account to make the process even easier.

Therefore, you can't find the money and you can't even get on an installment plan, what are my options? A final option offered by the IRS is called an offer in compromise. Keep in mind, this is only for extreme circumstances.

If you require an offer in compromise, you can offer to make a payment of a lump sum or fixed payments for a short period of time. This process requires that you have a complete personal financial statement and an application fee of $ 150 in addition to form 656.

These offers are evaluated on a case-by-case basis and may or may not be approved. If the IRS determines the information that you have provided that you are unable to pay the amount in full, the offer can be accepted. Although it is accepted, you agree to pay taxes in full and on time for a period of five years, once established.

Pay taxes that you owe is very important, so it is vital to explore all options before jumping to conclusions. Most importantly, file your return in time to avoid late filing penalty. Then, take the time to consider how realistic is it for you to pay taxes and what options are at your disposal.

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