What to Do If You Owe Taxes But Can’t Afford to Pay
In case you are unable to pay the IRS, try to be honest with them, as they always understand when people cannot pay the taxes or just evade paying. When you evade paying, you may go to jail. Data shows over 20 million Americans owe back taxes. Remember you are not alone.
If you owe for the current tax year, or past years, ignoring the problem or the IRS is the worst thing you can do. That will not succeed. The IRS never forgets about their money. File your tax returns even if you understand you are unable to pay the whole amount, as refusal to filing will add more penalties to your tab, and could lead the IRS to believe you’re not acting in good faith. Think about an installment plan and free tax software. If you owe less than $25,000, and have the ability to repay the debt within 5 years, this will help you significantly. Complete IRS form 9465, and send it to the IRS for approval. If they approve your installment plan, you will pay interest on the debt, but at quite reasonable rates. In case you can repay the debt within 1 year, your installment request will almost certainly be accepted. Installment requests lasting more than a year will receive more IRS scrutiny.
If they do not approve your installment plan, do not hesitate to request an offer in compromise, you can try to find an online tax filing service . This way you will get an opportunity of settling your tax debt with the IRS for an amount less than you owe. Submit a copy of IRS form 656. Use tax preparation software. The program is designed for people with serious financial troubles. When you provide a good history of filing and paying your taxes and prove you are unable to pay the entire amount owed, due to serious economic problems, the IRS will approve your request.
Choose honest communication to succeed. Learn details about the process before you start it.