Have you been shocked this year to find that you owe a significant sum to Uncle Sam? Don’t have the funds to make the payment in a timely manner? Here are some suggestions for how to minimize the damage to your pocketbook, as well as reduce the number of nasty messages from the IRS.
- People often make the mistake of thinking that they can file for an extension and delay when the taxes are due. Unfortunately, this is not the case. While you can certainly file an extension, the extension only delays the date the tax return needs to be filed by. Any estimated money that is due to the IRS is still due on April 15th. If not paid then, interest and penalties will be incurred. It’s an unpleasant reality but there’s not much we can do about that.
- If you can’t pay the entire amount that you owe, at least pay as much as you possibly can by April 15th. File your tax return by the 15th as well or file for an extension. By filing your return or requesting the extension and paying as much as you possibly can, you avoid or reduce the following charges:
- Avoid incurring a late filing penalty, which can be a significant hit
- Reduce the amount of the late payment penalty charged
- Reduce the amount of interest charges incurred
- If you do not have the means to pay all or much of your tax bill on time, consider taking out a loan or paying the tax using a credit card. The bank or credit card charges are likely to be significantly less than interest, late filing and late payment penalties charged by the IRS. Loans or credit cards allow you to pay the balance over time unlike the IRS.
- The IRS does offer payment agreements in some situations. If you know you cannot make the payment and cannot swing a credit card or loan, contact the IRS immediately to request a payment agreement. The IRS website (www.IRS.gov) offers an “online payment agreement” form, which you can complete and submit online. You can also submit “Form 9465 - Installment Agreement Request” along with your tax return. Be aware that in addition to the other penalties and interest, payment agreements incur a user fee.
- Contact a professional tax preparer to assist you with negotiating with the IRS. They may be able to review your return and identify if there are deductions that were missed to help drop the total due. They also understand the best ways to approach a payment situation and will help to reduce the pain of payments.
- Whatever you choose to do, DO NOT IGNORE THE ISSUE! You do not want an IRS collection effort hanging over your head, and the longer you ignore a problem with the IRS, the bigger the problem gets both monetarily and emotionally.