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Shows & Panels
Taxes: What to do if you can't pay
Friday - 3/27/2009, 1:25pm EDT
Senior Internet Editor
April 15th is coming. You've sat down, figured out your taxes, and realize you can't afford to pay what you owe.
The one thing not to do, says Registered Employee Benefit Consultant Ed Zurndorfer, is ignore it.
Zurdorfer tells FederalNewsRadio you have to file, "because there's a severe penalty for not filing."
Go ahead and file, says Zurndorfer, and pay what you can. The IRS will "bill you for the difference with some interest charges and a late payment penalty, but the late filing penalty, if you don't file, is much more severe."
Here are some options to consider if you can't afford to pay:
- Credit Card - "The charge for paying by credit card is strictly a charge between you and the credit card company. There is a small fee, they call it a 'convenience fee', the IRS imposes for paying by credit card."
- Installment Plan - Another alternative is to attach a Form 9465, Installment Agreement Request, to the front of your tax return, according to the IRS. "If you owe less than $25,000," says Zurndorfer, "you will automatically be granted that installment agreement. The IRS will approve your paying any balance due over a period of not more than five years." However, Zurndorfer adds, you have to be current on your taxes and will not be approved for this plan if you already are paying off another installment plan with the IRS.
- Extension of Time to Pay - "There's a little known fact out there that individuals can apply for an extension for payment and for filing your taxes." Using Form 1127, you'll have to prove that you can't pay the taxes and that you can't file your taxes. Examples, says Zurndorfer might include your home having burned down, house was flooded... You not only do not have the means to pay taxes, but you can't even put a tax return together.
The same ideas apply to filing state taxes: not filing is worse than not being able to pay.
On the Web:
IRS - irs.gov
IRS - Tax Payment Options
IRS - Form 9465 (pdf)
IRS - Form 1127 (pdf)
(Copyright 2009 by FederalNewsRadio.com. All Rights Reserved.)