Bucks Blog: Options if You Can’t Pay Your Income Taxes

Monday is the deadline for filing your federal income tax return. What if you owe taxes, but don’t have enough money to pay them?

For starters, even if you can’t pay, you should go ahead and file your return, says Bob Meighan, an accountant and vice president of TurboTax. “The most important thing is for you to file your taxes,” he said. That way, even if you can’t pay, you’ll minimize penalties by avoiding the one for not filing, or for filing late.

If you can pay something, go ahead and pay as much as you can — again, to minimize penalties and interest that will apply for paying late.

Then, he said, contact the Internal Revenue Service. It may go against conventional wisdom, he said, but “if you are struggling financially to pay your taxes, the I.R.S. is there to help.”

You can go online at IRS.gov and quickly apply for an installment plan that will let you pay the balance monthly over as long as six years.

You’ll pay a fee of $52 if the payment is deducted directly from your bank account (or less, if you meet certain requirements), as well as interest and penalties, but the cost is less severe than the penalty for not paying, he said.

Plus, if you don’t pay, the I.R.S. has the authority to garnish your wages, which may cause problems with your employer and damage your credit.

The installment option is available for those who owe $50,000 or less. If you owe more than that, you’ll need to contact the I.R.S. and fill out Form 433-F.

The minimum monthly payment for installment agreements is $25.

One other option is a negotiated settlement called an “offer in compromise,” in which the I.R.S. may accept less than owed, if you meet certain financial criteria. To see if you are eligible, you can fill out a prequalifying work sheet.

Have you ever been unable to pay all the taxes you owed at tax time? What did you do? Have you used an installment agreement to pay your taxes?

Article source: http://bucks.blogs.nytimes.com/2013/04/11/options-if-you-cant-pay-your-income-taxes/?partner=rss&emc=rss