“What should you do if you can’t pay your tax bill?”
This is one of the most frequently asked questions I get.
While having a tax bill you can’t pay is no Friday with donuts, it happens to the best of us and can be overcome with these 5 steps:
Tax debt is one of the most common debts in this country. It does NOT mean that you are bad with money, that you suck or that the IRS is coming to throw you in jail.
If you know you can’t pay, or if you get a notice saying you owe money, don’t panic. The IRS has resources and options to help you navigate this (see below). It will be OK.
If you owe taxes to multiple jurisdictions (Federal, state, etc.), make a list of what you owe. Keep in mind that the amounts may vary as interest and penalties are applied, so try to get the most accurate and updated balance that you can.
The IRS offers both short-term and long-term payment plans. They also offer an Offer-In-Compromise (where your debt will get settled for less than you owe) – use this calculator to see if you qualify. If you’re not able to pay at all right now, you can request a stay on your tax debt.
There are penalties for both failure-to-file and failure-to-pay. I have seen too many people not file their tax returns because they are afraid of the tax bill. Trust me, this is NOT the answer. The sooner you can file, the sooner you can explore an arrangement with the IRS or the state. Plus, if you don’t file after a period of time, the IRS may file for you – and they’re not going to include any helpful deductions that would reduce your tax bill. If you did miss your tax filing deadline- then you need to read this post.
Freaking out about your tax bill? If you’re a client, send us a message in the portal so we can help. If you’re not a client, talk to your tax professional so they can help you!