Can’t Afford to Pay Your Taxes? Here Are Your Options
Tax season can be a stressful time for many people, especially when you find yourself unable to pay your taxes. If you’re in this situation, don’t panic. You’re not alone, and there are several options available to help you deal with your tax debt.
This blog post will outline some practical solutions to help you navigate your financial difficulties and ensure you stay in the good graces of the IRS.
Enroll In The IRS Fresh Start Program
The IRS Fresh Start Program is specifically designed to help taxpayers who can’t afford to pay their taxes in full. This initiative offers several options, including installment agreements, offers in compromise, and penalty relief, which can make it easier for you to manage your tax debt.
By enrolling in the IRS start program, you can work with the IRS to create a payment plan that suits your financial situation, potentially avoiding more severe penalties and consequences.
Request An Installment Agreement
If you can’t pay your taxes in full, you might qualify for an installment agreement. This option allows you to make monthly payments toward your tax debt over a specified period.
To request an installment agreement, you can apply online using the IRS Online Payment Agreement tool or fill out Form 9465, Installment Agreement Request, and mail it to the IRS. Keep in mind that interest and penalties will continue to accrue on your unpaid balance until it’s fully paid off.
Also read: Capitalize on Precious Metal IRA Tax Breaks
Apply For An Offer In Compromise
An Offer in Compromise (OIC) is an agreement between you and the IRS to settle your tax debt for less than the full amount owed. This option is ideal for taxpayers who can’t afford to pay their taxes in full or would experience financial hardship by doing so.
To apply for an OIC, you’ll need to complete Form 656, Offer in Compromise, and Form 433-A (OIC) or 433-B (OIC), Collection Information Statement. Note that there’s a non-refundable application fee, and not all taxpayers will qualify for an OIC.
Request A Temporary Delay In the Collection
If you’re facing a short-term financial hardship that makes it impossible for you to pay your taxes, you can request a temporary delay in collection from the IRS. You’ll need to provide proof of your financial situation, and the IRS will assess whether a delay is appropriate.
During this time, the IRS won’t take any collection actions, but interest and penalties will continue to accrue on your tax debt.
Seek Penalty Abatement Or Relief
If you can demonstrate a reasonable cause for not paying your taxes on time, such as a natural disaster, medical emergency, or other unforeseen circumstances, the IRS may grant penalty abatement or relief.
To request this, you can either call the IRS or submit a written request using Form 843, Claim for Refund and Request for Abatement. Be prepared to provide documentation supporting your claim for relief.
Also read: 10 Small Businesses Tax Deductions You Need To Know
Consult A Tax Professional
If you’re unsure about the best course of action or feel overwhelmed by your tax situation, consider consulting a tax professional. They can help you understand your options, navigate the IRS process, and represent you in negotiations with the IRS.
Look for a qualified tax professional, such as a certified public accountant (CPA), enrolled agent (EA), or tax attorney, to ensure you receive expert advice and assistance.
File For Bankruptcy
As a last resort, you may consider filing for bankruptcy to discharge your tax debt. However, this option should be approached with caution, as it can have long-lasting consequences for your financial and credit situation.
Not all tax debts are dischargeable in bankruptcy, and specific criteria must be met for eligibility. Consult with a bankruptcy attorney to determine if this is the right option for you and to understand the implications of filing for bankruptcy.
Falling behind on your taxes can be a daunting and stressful experience, but there are several options available to help you manage your tax debt. From enrolling in the IRS Fresh Start Program to seeking penalty relief, these solutions can provide some much-needed relief in a difficult financial situation. Don’t hesitate to consult with a tax professional if you’re unsure about the best course of action. Remember, it’s always better to address your tax debt sooner rather than later to avoid further penalties and consequences.