Preparing your tax returns early will save you not only unnecessary stress but it can also save you some money. Around April 15, many individuals realize that they may not have enough money to pay their tax obligations to the IRS. If you’re one of them, getting a head start on tax preparation may give you additional time to collect necessary funds or clearly analyze your solutions.
If you can’t pay your taxes on time, the number one rule is: do not panic. Haste means waste and not being able to pay on time is not the end of the world. There are options available to taxpayers but there are some rules you have to follow.
#1 – File taxes on time
Whether you do or do not have enough money to pay the taxes you owe, you should file your tax return on time. File on or before April 15th; even though the IRS will impose interest on the amount you owe, it is less severe than interest and penalties in case of not filing or doing it after the deadline.
#2 – Contact the IRS
Don’t wait for things to happen for you. Instead, take control and reach out to the IRS explaining your predicament and try to find and establish some type of solution. Think your situation over and have a plan before you contact the IRS. Make sure that if they accept your proposal, you can fulfill it.
IRS often cooperates with the taxpayers and allows them to set up payment (installment) plans. Among accepted payment options, there are:
- Based on particular case, the IRS may grant you an extension to pay taxes. The extensions run for 60 or 120 days and typically will cost you less in interest and/or penalties that other options.
- Pay whatever you can at deadline; even if you receive an extension you still have to pay interest on the outstanding amount so the less you owe, the less interest you will pay.
- You can make a payment using a credit or debit card; IRS accepts Visa, Master Card, Discovery, American Express).
- Installment plans can be set up by submitting Form 9465, in writing, or by contacting the IRS directly. Taxpayers who owe less than $50,000 (including interest and penalties) and filed taxes can apply for installment plan on line and receive immediate response (); those who owe more than $50,000 need to submit Form 9465-FS and Form 433-F.
- If you experienced significant economic hardships in recent years consider filling for the IRS’s Fresh Start initiative. It has been extended into this year and it is related to more flexible requirements to qualify for Offer in Compromise program; it is not guaranteed that all applicants will qualify but those who will might get their liabilities settled at less that full value.
If you feel that your situation does not fall into what might be considered typical, you can contact IRS at 800-829-1040 and discuss details of your situation. As long as you’re committed to settling your tax obligations, the IRS might be much more accommodating and understanding. Occasionally we all can experience unfortunate life events but playing by the rules and proper planning will help us get back on track much faster.