So you have calculated your federal income taxes and found that you owe the Internal Revenue Service (IRS). Perhaps you owe them a large amount, and you cannot afford to pay them the amount owed. What do you do?
The best thing to do is to still file your tax return on time. Even if you cannot afford to pay your taxes, filing your return is still the best option for several reasons. If you intentionally choose not to file your return altogether, the IRS will impose penalties on you in addition to the taxes you owe. These penalties can include fines for missing the due date for paying your taxes and interest charged on the unpaid taxes. If the IRS needs to escalate the collection of the taxes due, they can seek to obtain a judgment against you, possibly garnishing your wages and seizing your assets (excluding your home and business, which are protected from seizure by the IRS). The IRS may even seek to throw you in jail, although this is generally only in extreme situations of tax avoidance, as the IRS knows that if you are in jail it may be more difficult if not impossible for you to raise or earn the money needed to pay your tax bill.
Remember that if you cannot pay your taxes, you are not the first or only one in this situation. Because the inability to pay taxes due is not uncommon, the IRS has established payment options for taxpayers who legitimately cannot afford their tax bill. These options include:
- An extension, which is simply moving the due date for tax payment further out into the future,
- An installment plan, which is paying the tax bill in a series of payments over a period of time rather than as a lump sum, and
- An offer in compromise, which is when the IRS accepts partial payment for the total tax bill in lieu of the full payment.
For the IRS to make these payment options available to you, you must first do your part and file your return.
Should I hire a tax attorney?
If you cannot pay your taxes, a tax attorney will have the knowledge of how the various payment options work and if your situation will allow you to pursue one of them. Even though these options provide time for the taxpayer to make payment, the IRS generally charges interest on the unpaid taxes. And the IRS may seek proof of your financial inability to pay your tax bill before they will allow you to pursue some of these relief options. Therefore, having a tax attorney on your side is a wise decision.
If you complete the short evaluation from below, a tax lawyer will review your situation free of charge. The review is 100% confidential and there is no obligation to you. Seek professional help today in evaluating your options for working with the IRS to settle your unpaid tax bill.
Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.