Can’t Pay Your Taxes? Four Things You Should Know
As April 15th looms, do you have a knot in your stomach because you can’t pay what you expect to owe? Then Billshark has some solutions for you.
The new Republican tax law has resulted in many taxpayers owing money, even when they haven’t in the past. One reason is that some people didn’t adjust their withholding at work when the new rules went into effect.
An even bigger reason—resulting in some shockingly high tax bills—is the loss of many previous allowable deductions: property and local income taxes (known as SALT, or state and local taxes); personal exemptions (last year, $4,050 for yourself and each family member); the interest on home equity loans; moving and job-related expenses; and, tax preparation fees. Thus, many are finding they owe thousands of dollars this year.
What To Do
- File on time
Whether or not you have the money to accompany your return, file it! The IRS will assess penalties not only on the unpaid money owed, but also for not filing a return. The late fee on taxes owed is one-half of one percent; the penalty for filing late is five percent a month on the money owed. You can file for an extension (IRS Form 4868) and avoid the penalty attached to missing the April 15th deadline. But any money you owe is still due on April 15th, and the penalty and interest will start accruing on that date, unless you paid 90 percent of the money owed by April 15th.
- Pay what you can
Because penalties are assessed only on the amount owed, pay as much as you can of what you owe. This also demonstrates to the IRS a good-faith effort on your part. Do not borrow money on credit cards or loans unless the interest rate is below the half-percent you’d pay the IRS.
- Contact the IRS
If you can’t pay your bill, contact the IRS immediately. Contrary to the image the IRS-haters would have you believe, the agency is staffed by professional people who understand that sometimes people encounter unusual circumstances. This is especially true this year, when the fallout from the new tax revision caught so many people by surprise.
From the IRS website:
“Don’t panic. If you cannot pay the full amount of taxes you owe . . . contact the IRS to discuss your payment options at 1-800-820-1040. The agency may be able to provide some relief such as a short-term extension to pay, an installment agreement or an offer in compromise, or by temporarily delaying collection by reporting your account as currently not collectible until you are able to pay. In some cases, the agency may be able to waive penalties. However, the agency is unable to waive interest charges which accrue on unpaid tax bills.”
What Not To Do
- There is one and only one “don’t” under this category, and that is, don’t pay one of those endlessly advertised “tax relief” companies you see on television and radio this time of year. The legitimate ones (and they are few and far between) will take money to do what you can do for yourself directly through the IRS. The illegitimate ones (the vast majority) will take your money, string you along, then disappear, leaving you high and dry.
The Federal Trade Commission (FTC) warns:
“If you pay [tax relief companies] an upfront fee, which can be thousands of dollars, these companies claim they can reduce or even eliminate your tax debts and stop back-tax collection by applying for legitimate IRS hardship programs. The truth is that most taxpayers don’t qualify for the programs these fraudsters hawk, their companies don’t settle the tax debt, and in many cases don’t even send the necessary paperwork to the IRS requesting participation in the programs that were mentioned. Adding insult to injury, some of these companies don’t provide refunds, and leave people further in debt.”
Avoid these firms like the plague!
If you owe the government money, let Billshark find the hidden savings on your bills. That’s easy money in your pocket that you can put toward your tax bill (or anything else you’d like).