I can't pay my taxes
Posted By: Dr. Frugal in Taxes on 08/04/2007 at 21:18:07
It's a disturbing moment when you finish your tax return and realize you owe additional tax and don't have the money to pay for it. Don't panic. First of all, don't compound the problem by filing your tax return late. File by the due date or file for an extension even if you can't pay all of the taxes due. Penalties for late filing can add up to 25% to your bill and if you don't have enough to pay the principle, you certainly don't have enough to pay an additional 25% on it.
You have a number of options for coming up with the cash later. Try to take out a bank loan for the amount you owe. The interest rate will be lower than the rate charged by the IRS. If that doesn't work, consider using your credit card or applying for a new one with a low introductory rate and paying off the balance before the rates go up.
If you can show the IRS that you can't sell assets or borrow money to pay the taxes without causing undue hardship, consider requesting an extension to pay by filing form 1127 at the time the taxes are due. You'll have to provide a list of your assets and liabilities (debts) and three months' worth of your incoming and outgoing cash.
Another option is to request an installment agreement with the IRS by completing Form 9465, Installment Agreement Request, and attaching it to your return. State the amount you can pay monthly towards your tax debt. If your request is approved, you'll have to pay interest at .5% monthly (note that I said monthly and not annually) but you won't incur any additional penalties.
No comments yet. Future commenting has been disabled.
Related:How are tax returns chosen for audit?
Making Tax-Wise Financial Decisions
Do I need a CPA?