We’re now less than a week away from the filing deadline for federal tax returns. Many of us procrastinate when it comes to filing because we have seemingly more important (or more entertaining) things to do. But others procrastinate right past the deadline for a more serious reason: they don’t have the money.
If you can’t afford to pay your taxes, it may be tempting to just not file a return. You might assume that the IRS handles millions of returns and probably won’t notice that yours is missing. Unfortunately, this approach rarely works, and the consequences of getting caught are severe.
So what’s the solution? Believe it or not, proactively communicating with the IRS may your best bet. The agency offers a couple of extension options which are free and relatively easy to get approved for. But these extensions just delay the inevitable. And if you don’t have the money to pay in full now, you may not have the money in four to six months.
You can also apply to set up an installment agreement that allows you to pay off your debt over time in monthly payments. This is subject to IRS approval.
Finally, you may be able to settle your debt for less than full value with what’s called an offer in compromise. This tends to be the trickiest option, however, and the IRS rejects many such offers.
Whether you owe back taxes already or are unable to pay what you owe on this year’s return, working with the IRS will almost certainly be better than burying your head in the sand. But even before contacting the IRS, you may want to discuss your case with an experienced tax law attorney who can explain your legal rights and options.
Source: Daily Finance, “Can’t Pay Your Taxes? How to Get IRS Relief,” Dan Caplinger, April 10, 2015
