Different Options Available When You Cannot Afford To Pay Your Taxes

by Leon on March 6, 2013

what to do when you cannot afford to pay your taxesThere is no way to avoid paying your taxes and every year we must cough up our fair share. Unfortunately, you might get a tax bill that you might not be able to afford. This can be due to a number of reasons, like an increase in your tax bracket or perhaps you didn’t take into account your total taxable income. While you won’t go to jail, you might have to pay a penalty for being late, but often times the IRS will be lenient. There are a number of options for people that can’t pay their total tax bill and as long as you make the right arrangements you should be able to avoid the stiff fines. Here are some different options that are available when you can’t afford to pay your taxes.

First things first, you always want to send in your return. You want to do this because the penalty for filing your taxes late is far greater than the fines for not paying your taxes on time, especially if you don’t make an arrangement with the IRS first.

When you are looking for some money to pay your taxes, you want to search high and low. Chances are that you will find some money somewhere so that you can start paying off your taxes. This source of cash can be from friends and family, and even credit cards, or cashing in on your paid time off at work. In the end, you will free up your financial burdens by taking care of your tax bill, sooner rather than later.

Also, you can consider an installment plan. Many times the IRS will be more than gracious enough to allow you to arrange a payment plan. When thinking about how much you want to pay a month, you want to consider the monthly penalty fees and make sure your payments are above the fees so that you don’t end up throwing away your money.

You can also request an extension to pay, from the IRS directly. When you do file your federal tax forms you can put in a special request that you would like to pay at a later date. You must fill out a brief application to see if you are eligible, but generally people that can definitively predict their next paycheck or an influx of cash will be approved.

Another option you have if you can’t afford your taxes is to take out a loan. Sometimes the interest accrued on paying back a loan is far less than the interest and penalties that will accrue on your income taxes.

Lastly, if you have found yourself in dire financial straits, you can apply for an Offer in Compromise. This is usually reserved for severe circumstances, but you must fill out an application with your detailed financial standing and a processing fee of $150. When you do apply for an Offer in Compromise you can avoid heavy penalty fees and have more time to pay back your taxes. This is also a great option for younger people or people that are in serious debt, because you don’t need to bury yourself even further in debt with another stressful financial burden.

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