Can't Afford to Pay the IRS?
Even though I have a couple of extra days to file my tax returns this year, I won't be able to come up with enough to pay the IRS what I owe.
The age old question about paying now or later came to a head for me this year, when I chose the "pay later, and invest your money in a high-interest savings account in the meantime" strategy, but forgot to actually save the money. So, I owe Uncle Sam a few grand. Only I don't have a few grand.
It's what my mom would call "A really big oopsie", and what my sister would call "Way to go, dumbass."
Fortunately (can the term "fortune" be applied when talking about paying taxes?), the IRS has a payment plan option. You get charged interest, but they don't take away your house or anything.
I wasn't initially sure what to do - I've never owed the government anything before. Bless the internet. Here's an article from MSN Money with a few tips.
As always, the folks over at Motley Fool have some valuable financial advice for the monetarily challenged:
First and most importantly, don't let your inability to pay your tax liability in full keep you from filing your tax return properly and on time. Include as large a partial payment as you can. The simple act of filing your return, even if you don't include full payment, can save you substantial amounts in late-filing penalties. You can also keep the IRS from instituting its collection process with some payment extension procedures and installment-payment arrangements.
It's a bummer to think that you can owe the government more than you really owe the government (interest and fees), isn't it? But, farther down the page, I read this:
In about 45 days, the IRS will send you a bill for the remaining balance due. If you can pay it then, do so. If you can't, send as much as possible (again, reducing penalties and interest) and hang on. In another 45 days or so you'll get another bill from Uncle Sam. With any luck, you can then pay the balance due. You'll likely be able to go through two or three of these billing cycles before the IRS bugs you for some type of formal payment method. But if you can clear up the matter using bigger chunks of payments over two or three IRS billing cycles, you'll pay some interest and penalties, but you'll save some time by not being required to complete additional IRS paperwork.
You owe, too?
- File your taxes. Pay what you can.
- You'll get a snippy notice in the mail saying that the IRS wants the rest of the money. Pay more. If you can't pay it all off, you'll have to go through the formal payment plan process.
- If you still owe less than 25K (and let's hope you do), go here and start a payment plan. There's a fee to start a payment plan.
- If you owe 25K or more:
More than $25,000 in combined tax, penalties, and interest may still qualify for an installment agreement, but a Collection Information Statement, Form 433F may need to be completed. Call the number on the bill or mail the Request for Installment Agreement, Form 9465 and Form 433F to the address on the bill.
Also, seriously consider having someone help you set up your deductions next year, yes? I know I will.
Disclaimer: The links and mentions on this site may be affiliate links. But they do not affect the actual opinions and recommendations of the authors.