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Being unable to pay your federal tax bill can have major implications for your finances, your credit score, and your ability to live the life you want to live. Penalties and interest on unpaid taxes will begin to pile up and create a snowball effect that will eventually bankrupt you.
Some people are faced with an inability to pay their taxes because something unexpected happened, like being laid off or injured in an accident. Others may have made mistakes on their W-4 withholding forms or been simply negligent.
Whatever the case may be, if you cannot pay your federal tax bill, you need to take quick and effective action to help minimize the damage and put a plan in place to make up for your lack of payment.
Below we’ve detailed six steps you can and should take if you cannot pay your tax bill. Please remember this blog is not intended as legal advice for your specific situation. If you cannot pay your tax bill, please call Weisberg Kainen Mark to learn how we can help.
1) File on time
Even if you are not going to be able to afford your tax bill, file your taxes on time anyway so that you can avoid any late fees or penalties exacerbating the amount you owe.
2) Pay all you can
Once again, it’s better to pay a little bit than nothing at all. Interest and penalties for nonpayment from the IRS will be based on your unpaid balance, so paying off as much as you can afford will help minimize what you owe later.
3) Hire a tax attorney
An experienced tax attorney like those at Weisberg Kainen Mark can help you figure out all the options available to you and negotiate with the IRS on your behalf. We will guide you towards the actions that will best serve your interests and save you the most money possible.
4) Installment Agreement
The IRS may be willing to grant you an installment agreement where you will pay off your unpaid tax liability plus interest and penalties, in regular monthly installments over a designated period of time rather than owe it as a lump sum. This will normally cease any collection efforts against you by the IRS and could give you the time you need to get the necessary funds together to pay back what you owe. These agreements can be tricky to negotiate, but a strong tax attorney can help you effectively navigate these challenges.
5) Offer-In-Compromise (OIC) – Doubt as to Collectibility
Like the installment agreement, this is another mutually beneficial arrangement between you and the IRS that can be complex to negotiate, so you will want to utilize the services of a tax lawyer for this as well. OICs are for situations where you cannot pay back what you owe. They are settlements where the IRS agrees to accept less than the total amount you owe—usually up to whatever amount the IRS believes is the maximum it will be able to collect from you within the 10 year statute of limitations on collections.
6) Short-Term Extension
Finally, your tax attorney may be able to negotiate for you a short-term extension if it is clear that you will soon be able to pay what you owe on your tax bill. This is particularly useful if you are expecting to have more money in the near future, such as going back to work after an accident or knowing you will soon receive a bonus at work.
We understand how stressful taxes can be for you, particularly if you owe the IRS money and can’t afford to pay your tax bill. Don’t allow yourself to be sunk by tax debt. You have options for relief available to you, and Weisberg Kainen Mark can help you figure out which options work best for your specific situation. If you are facing a tax bill that you can’t afford to pay, give us a call and let us fight to help you take back your life.
Weisberg Kainen Mark, PL
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