Many taxpayers make a solid effort to file their tax return with the IRS and to pay the full amount of taxes owed by the due date each year. Others, however, overlook this important financial matter as a general oversight because of a busy work schedule, and others intentionally do not file a tax return. Failure to file a tax return or to pay the amount owed is often related to a lack of funds. Paying taxes can be burdensome to your budget, but it must be done. The reality is that the IRS’s primary objective is to collect tax revenue from taxpayers and to provide that revenue to the federal government for its funding. In addition, the IRS is legally empowered to take significant steps to enforce payment from all parties.
Why You Need to Pay Your IRS Taxes on Time
If you are thinking about filing your tax return late or if you have already filed it late, you may be wondering what will happen to you. Many people have heard stories or seen movies where the IRS seizes the home and belongings of a taxpayer, leaving the taxpayer penniless and homeless. Others have heard stories about people imprisoned for tax evasion. The reality is that these are possible outcomes of a very serious issue with taxes. However, in most cases, the IRS will simply charge interest and assess late fees. These can be costly, and some fees are as much as 25 percent of your total tax bill. If you are already having trouble paying your tax bill to the IRS, paying the additional interest and fees can be financially impossible. However, if you still fail to make a payment in full after interest and late charges have been assessed, the IRS may take additional action against you. For example, they can place a tax lien on your home or garnish your wages. These issues can be costly to deal with, and they can also affect your credit rating.
Is an Offer in Compromise Right for You?
There are instances when the IRS will forgive a portion of your tax debt. This settlement of debt is not available to everyone, and it only applies to very specific situations. For example, if you have suffered from a considerable financial hardship, a portion of your debt may be forgiven by the IRS. However, you will typically have to pay the remaining amount in full at the time the offer in compromise is agreed to, or you can set up an installment payment plan for the amount owed at this time. An offer in compromise is best negotiated through professional legal assistance.
Can You Set Up a Payment Plan?
If you have not yet filed your tax return, keep in mind that you may request one or two extensions to buy some time. Interest charges on your taxes due may be assessed, but this is generally a smart option to consider. Another idea is to set up a payment plan with the IRS. This is easy to do by simply submitting a form to the IRS by the tax filing due date and requesting a payment structure that works well with your budget. Typically, a payment plan stretches out the payment of debt over a full year, but some payment plans can extend for four or five years. The payment plan request must be approved by the IRS, and you can only use the payment plan option once every couple of years. Therefore, this should not be your primary tax-paying strategy going forward.
How Can You Seek Additional Tax Assistance?
Issues with the Internal Revenue Service can have a major impact on your life. All taxpayers should make an effort to estimate their annual tax liability well before the due date so that they can plan accordingly for the payment of taxes owed. However, when this is not possible or ideal, there are other strategies available. If you believe that you will not be able to file or pay your taxes by the due date, consider seeking professional tax help. A tax attorney in your area can assist with providing you legal advice and negotiating with the IRS. A tax accountant can structure the tax return accurately and can offer financial recommendations for the payment of your taxes.
Falling behind on your taxes can be costly. After all, interest and late fees can add up, and they can make it even harder for you to get caught up financially. While many people will fall behind from time to time, it is important that you take this matter seriously. It could have major ramifications on your life for years to come. Take time to explore your payment options today, and seek financial assistance as necessary.