Tax day is officially behind us. What should you do if you didn’t pay your taxes?
Many of us dread April 15th
every year - well this year it was April 18th. If you didn’t
pay your taxes, then you dreaded April 19th even more – that was the first day you
owed arguably one of the most powerful collection companies in the world – the
IRS. Until April 19th, it was a worry in the back of your mind. Now it’s
reality. For whatever reason, you didn’t pay your taxes in full or not at all.
You woke up the morning of the 19th with a gut-wrenching feeling not
knowing what to do. You’re not alone with this feeling; millions of Americans
are unable to pay their tax debt in full by the due date.
Delinquent Tax Debt and What To Do About It
When your taxes are delinquent you
have the following concerns: penalties, interest and IRS enforcement actions. To
minimize these concerns, stay in touch with the IRS and work with them to
resolve your outstanding tax debt. If you work with the IRS to bring current
your back taxes, in most cases they will not attempt collection enforcement
actions of your assets such as a bank levy or a wage garnishment. The IRS uses
these tactics to gain the attention of delinquent taxpayers who ignore rather
than address the IRS’ requests for payment.
Pay as much of your tax bill as possible and as soon as possible - even
if you can’t pay in full. If you have a delinquent balance with the IRS,
starting on the 19th you will
be assessed penalties and interest based on the amount outstanding. Paying as
much as you can and as soon as you can will minimize your penalties and
interest.
How To Minimize Penalties and Interest
The two penalties most commonly utilized by the IRS are for
non-filing and for late payments. File your tax returns - even if you can’t pay.
The non-filing penalty accrues at 5% per month, with a cap of 25%. The late
payment penalty is .5% for each month that you owe, with a maximum penalty of
25% as well. Also, not filing your tax returns is a crime. Granted, the police
probably didn’t show up on your door
step on the 19th, but you will still want to file your tax returns so
you are compliance with the IRS. Once in compliance (returns filed) your issues
will turn from a criminal matter to a civil matter and then your only worry
will be about penalties and interest.
Interest on the outstanding balance as of when this article
was written is assessed at 9% per year or .75% per month. This interest rate
can fluctuate up or down just like interest rates do at your local bank.
Tax Resolution Payment Options
You have payment options if you have a delinquent account
with the IRS. When working with the IRS to determine a repayment plan, the key
to remember is that the IRS can’t ask you to pay more than you can afford to
pay. This means you must be able to pay your basic living expenses such as
food, housing, insurance, car payments, etc., before they are allowed to collect
one dime. The money left over, known as your discretionary income, this is what
the IRS can stake a claim on. Depending on how much you owe and how long it
will take you to payoff, the IRS will have different requirements for
documentation to prove your discretionary income and to determine your different
repayment options.
Their short-term payment program will allow you an extension
on your payment for up to 120-days. You will be assessed penalties and interest,
but there is no fee for entering this payment program. If you can’t pay your
balance in full within 120-days, you will need to ask for an Installment Agreement. This gives you up to 6 years to pay your debt in full. The IRS will
charge a small fee to enter this program - under $200.
If you truly can’t afford to pay your outstanding tax
balance, the IRS has another program called the Offer-In-Compromise. This
program also has a small fee - under $200 (waived if you qualify for the
low-income waiver). This is essentially a negotiation you enter into with the
IRS to settle your tax bill for less than the full amount owed and is granted
only to those who are in extreme financial hardship and are able to provide proof
of this financial hardship. If you are approved for this program, you will have
up to 24 months to pay this reduced tax bill.
The IRS has one additional
program, Currently-Not-Collectable. This program assists the taxpayer who has only enough money to pay for basic living needs, or
even less, and enables the taxpayer to ask for a reprieve from collections.
This allows the taxpayer the opportunity to get back on track financially and
then later to enter into a repayment plan.
While not an IRS
program, you do have the ability to use the bankruptcy laws to help you with
your delinquent tax bill. However, there are substantial legal and credit
consequences to think about before attempting to file for bankruptcy.
If you would like to discover more on how to resolve your delinquent taxes for the least amount possible without using an CPA or other such high priced companies simply call us at 877-801-9166 or read more here.
