September 30, 2022
Can’t pay your taxes? Don’t panic
One of the most common responses individuals have to tax-related issues is to panic. It is indeed a serious matter if you find that you are unable to pay your taxes, but rest assured that you do have options.
An installment plan
If you cannot pay your taxes, you can set up an Installment Agreement with the Internal Revenue Service (IRS). This allows you to pay as much as you can when you file, then pay the remaining balance in monthly installments. When you submit your taxes, you must attach an Installation Agreement Request to get the process started.
It is crucial that you still file your taxes on time and pay as much as you can at that time if you want to avoid interest and late payment penalties.
Offer in Compromise program
If paying your taxes in full would create a financial hardship for you, an offer of compromise could be an option.
Per the rules of this program, you can offer to pay less than you owe. The IRS then looks at several factors to determine if that amount is acceptable. In general, the agency is looking for situations in which it would not be able to collect more from someone in a reasonable amount of time.
There are eligibility requirements for this option, including filing all your tax returns, so talking to your attorney about this right away can help you determine if it is right for you.
Seeking penalty relief
If the issue you are facing stems from being unable to pay the penalties for failing to comply with tax laws, you could be eligible for penalty relief from the IRS. It may approve relief for taxpayers under the following circumstances:
- The failure stems from circumstances beyond your control
- It is your first tax penalty
- You made reasonable efforts and exercised good faith to comply
In these cases, you could qualify for penalty relief.
These are just a few choices that can help you overcome tax-related challenges and avoid serious penalties. Exploring the options and taking action sooner rather than later can maximize the resources at your disposal.