Failing to pay your taxes can have serious consequences. Not only are there fees and penalties that you’ll have to pay, but if you avoid paying your taxes for long enough, you can face criminal charges. Unfortunately, many people find themselves genuinely unable to afford their taxes when the deadline comes, and they’re uncertain of what to do.
If you’ve found yourself with a high tax bill and insufficient funds, follow these 3 steps to minimize fees and penalties, and help you to avoid further complications. Speak to one of our Provo CPAs if you have further questions.
Step 1: File on Time
We’ve seen it happen many times. You calculate what you’re going to owe in taxes, and you’re left in shock. You know you’re not going to be able to pay for it, so what do you do? Some people think that if they avoid filing their taxes, they can keep the IRS from demanding the debt for a while. But failing to file on time saddles you with additional fees and penalties, on top of the fees you’ll receive from being late on your payment.
So, regardless of how much you owe, always make sure to file your taxes when they are due.
Step 2: Make a Payment
Even if you can’t afford to pay a significant portion of the tax debt, making a payment–any payment at all–can help to reduce the amount you’ll end up paying in penalties. The fees for late payment are always calculated based on the amount that you owe. Every month, 0.5% of your unpaid debt will be added to what you owe; and every year, an additional 5% will be added.
Paying even a quarter of your debt can make a big difference in the end, significantly reducing the penalties that will be added in every month and every year.
Step 3: Get on a Payment Plan
Once you’ve filed and paid what you can, call the IRS and your local tax office to let them know that you are making every effort to pay what you owe. When you’re proactive like this, the IRS will quite frequently allow you to get on a payment plan to pay off your debt with minimal fees and penalties.
You can also request a payment plan online at www.irs.gov/payments, or by having one of our Provo CPAs file Form 9465 on your behalf.
At Biesinger & Kofford CPAs, we understand that being unable to afford your taxes is a stressful experience. We are here to offer any assistance that we can in filing your taxes, submitting a payment, and requesting a payment plan on your behalf. Contact one of our Provo CPAs for further assistance.