If you realize or suspect you may’t pay the taxes you owe this tax season, you must nonetheless file a return with that data or file for an extension. That’s the highest piece of recommendation that tax professionals need you to know.
“The IRS desires to work with you,” mentioned Tom O’Saben, director of tax content material and authorities relations on the Nationwide Assn. of Tax Professionals. “However in the event you’re asking the IRS for some assist, they should know one thing about you. So the very first thing is to have that return filed. The No. 1 takeaway is that owing cash will not be a purpose to not file.”
When you don’t file a return or ask for an extension, then curiosity and penalties start to accrue instantly. These prices are largely avoidable in the event you share the details about your circumstances with the IRS in a well timed approach. Submitting a return with out paying taxes owed in full is preferable to not submitting.
To be clear, in the event you don’t pay all of the taxes you owe by the April 15 submitting deadline, curiosity will accrue even in the event you’ve been granted an extension to October, however that curiosity might be extra manageable than charges that add up if you pay no taxes in any respect.
“The worst case situation is that you just don’t file and find yourself being accountable for penalties afterward,” mentioned Emily DiVito, senior advisor for financial coverage on the nonprofit Groundwork Collaborative and former U.S. Treasury advisor. “That’s not good for anybody. However there are alternatives to ask for extensions and to go on fee plans.”
Right here’s what to know:
What occurs if I don’t pay my taxes?
Along with tacking on curiosity and penalties, the IRS can ultimately garnish your wages, place a lien in your property, and even place a maintain in your passport. However in the event you file for an extension, or in the event you file your return along with your monetary data, you may keep away from these penalties. Even in the event you don’t have the cash to pay what you owe in full by April 15, pay only a small half if you file.
Sure. throughout the nation are staffed with volunteers who will assist you file a return or organize for an extension without spending a dime. These volunteers may help you arrange an installment fee plan of as many as 72 months to repay any owed taxes. The IRS Direct File program can also be free to make use of.
“Whereas the query mark if you go to click on the button to pay could be intimidating, we need to guarantee that taxpayers get the cash you’re owed too,” DiVito mentioned. “Most taxpayers — definitely most working taxpayers — get a refund. However the way in which that a whole lot of the tax credit operate, you solely get that refund in the event you file your taxes within the first place.”
Are there different potential outcomes?
When you’ve skilled uncommon hardship, and also you share that with the IRS, the IRS can typically put your account in “currently-not-collectible” standing. To try this, you share details about your revenue and dwelling bills, and the IRS determines in the event you qualify.
“Let’s say you’ve been unwell, and also you misplaced your job from sickness, and you’ve got critical medical payments. You’ve had all of the unhealthy luck, and issues occurred outdoors of your management, and also you want some reduction,” O’Saben mentioned. “Then the IRS can place you in uncollectable standing. However all of this requires dialog and communication. Nobody desires to confess they’re having financial issues, however the IRS will work with you in the event you do.”
There are additionally uncommon circumstances wherein the IRS will settle your tax debt for lower than the quantity owed, referred to as an “supply in compromise.” VITA tax professionals may also assist you see in the event you’re eligible, or you need to use .
I didn’t file my taxes final yr. What now?
That’s OK. Begin now.
“I’ve been doing taxes for greater than 35 years,” O’Saben mentioned. “The No. 1 purpose folks don’t file is that they’ve a sense they could owe — which could possibly be unsuitable — and so they don’t need to face it. However it’s not an issue that’s going to go away. So inform the IRS the reality of the state of affairs. And they’re going to work with you.”
Miklos Ringbauer, a CPA and tax skilled in California, echoed this.
“It’s completely OK,” he mentioned. “The IRS offers with each single taxpayer. They’ve handled this earlier than. There’s nothing they haven’t seen.”
Lewis writes for the Related Press.
