Posted by : Daniel Stoica in (Blog, Federal Income Tax, Income Tax Return, Income Taxes, Tax Forms) On: May 29th, 2011
April 15th (or April 18th in 2011) has passed and, hopefully, you have finished your return and have sent it in to the IRS. However, you may be someone who found out that you owe taxes and can’t afford to pay, so you did not file your tax return. Unfortunately, not filing your tax return is actually worse than filing and not having the ability to pay. It is always better to file your return and work out a payment with the IRS than to avoid filing and paying altogether. In other words, file your return immediately.
There is a 5% penalty for each month you are late. The maximum is 25%, but if your return is more than 60 days late, it will be a minimum of $100, or the balance of the taxes owed, whichever is smaller.
Not paying at all doesn’t get it paid. Think of all of the possible sources of money you might have. If you cannot produce the funds, there are a few other places to get the money. One of your best solutions is to negotiate directly with the government and agree to some sort of payment plan. The government is the top creditor that must be paid when you owe. Any assets, excluding your home or business, can be liquidated if you owe taxes. And don’t even think about trying to hide your assets. That’s fraud, and you will go to jail.
Work with the IRS to come up with a payment plan. You will need to send an “Installment Agreement Request” using a 9465 form. Send it to the IRS for review and approval.
You might qualify for a payment plan if you don’t owe more than $25,000 and you have to pay it off within five years. The length of your payments is a combination how much you owe and the interest rate. Interest rates change every quarter, so they aren’t guaranteed maximum payments. If the interest rate goes down, you may end up paying it off sooner. This doesn’t happen very often, but it does happen. However, if you overpay, the IRS will owe you interest.
If you don’t qualify for the payment plan, you can check the IRS’ Collection Financial Standards to find an alternative for paying.
If the IRS approves your request, you will be charged a fee of $105, but it can be lowered to $52 if you set up monthly payments through electronic funds transfer. The IRS deducts the fee from your first payment.
Even though your 9465 form is approved, you will still owe interest, and a late payment penalty may be added on any taxes not paid by the due date. File your return on time and pay as much of the tax as you can to avoid additional fees.
The 9465 form is easy to fill out. You will fill out your name, address, Social Security number, the name of your bank and your employer. You will then enter how much you owe and how much you can pay each month. Almost all requests from those who promise to pay within 12 months and stay current with this year’s taxes qualify for the payment plan.
If you have any questions about filing a tax return, your best bet is to contact a tax professional.