Tax Litigation Law Office of Scott Kauffman
(949) 474-1820

Hackney Literary Award
Mighty River Short Story Contest Winner

Can't pay your federal tax bill? What are your options?

As we hit the mid-point of the 2017 tax season, it is time for a post on what to do if you can't pay. In its latest weekly update of March 3, the IRS said it had received 61 million returns and had processed 59 million of those.

Many of these early filers receive refunds. The average according to this latest information was $3,016. If you know you owe, you may hold off on filing. But time will be running short to meet the April 18 deadline. Here are some of your options.

Claiming too many exceptions, working more than one job and non-wage income (for example alimony, self-employment income or unemployment compensation) can all lead to unpleasant surprises this time of year. If you don't have the money to pay all that you owe, you should at least file your return on time

1. Make the deadline

Either submit your return before the filing deadline or ask for an extension. This can avoid the more substantial of two common penalties - the failure to file penalty is five percent of the balance due each month the return is late up to a max of 25 percent.

If you owe $20,000 to the IRS, you can avoid $1000 in penalties each month by filing on time.

2. Pay as much as possible

Send in a partial payment with your return. Even if it is $5,000 of that $20,000 balance it will reduce the penalty you owe each month for failing to pay on time.

This failure to pay penalty is much lower at .05 percent each month. This monthly penalty on the $15,000 balance remaining is $75 per month. 

3. Ask for an installment agreement and Offer In Compromise (OIC)

If you will be able to pay off the balance, but need more time to spread out the payment consider the installment agreement. If something has changed with your situation that means you will never be able to pay off the back taxes, consider the Offer in Compromise. But make to find out more about the requirements of an OIC, because this remedy is not right for most.

Each situation is different. Seek tailored tax advice when the amount you owe tips into the tens of thousands. Getting to the root of the problem now may also avoid it from recurring in future years.

No Comments

Leave a comment
Comment Information