What Happens If I Can’t Pay My Tax?

Your taxes are complete and the news isn’t as good as you’d hoped – you owe. But you don’t have the funds to pay right now. Despite how it feels, it may not be as bad as you think. Here are a few things you should be aware of.

File on time. Even if you can’t pay the tax owed, make sure to file your return on time or file an extension. This will ensure that you don’t also end up owing penalties for filing late.

Pay what you can. Late payment penalties are calculated on the unpaid balance, not the original bill. If you can’t pay the entire bill, make whatever payment you can afford.

Setup a Payment Agreement Online. The IRS offers an online system for establishing a payment arrangement (go to IRS.gov). You can also file Form 9465 when you file your return to request a payment arrangement. By doing so, you avoid the IRS beginning to pursue collection actions.

Respond to IRS letters. If you do receive a letter asking for payment from the IRS, respond to it or hire a tax professional to assist you in doing so. But don’t ignore it. The IRS tends to be much more agreeable when you respond to them.

Keep in mind that while taxes owed is a debt just like anything else, the IRS is NOT a creditor like everyone else. They have broad powers and can be very difficult to deal with. So by taking the right steps now, you’ll avoid the unpleasantness of dealing with the IRS as a collection agent in the future.

Have you received an IRS Collection notice? Contact us today at (480) 888-7111 to schedule your free tax consultation or submit a web request here.