You’ve crunched the numbers and realized you owe more than your wallet can handle. Before you panic, let’s break it down so you can avoid unnecessary penalties. Take steps to keep your peace of mind:
File Your Return Anyway
Even if you can’t pay, file your tax return on time (or file an extension) to avoid one of the most expensive mistakes taxpayers make. The failure-to-file penalty is 5% of the unpaid tax per month—which adds up fast! Please note that an extension is an extension of time to file, but not an extension of time to pay. Therefore, if you owe a balance of tax it will have to be paid by April 15th with the extension.
Pay What You Can
It’s okay if you can’t pay in full. Pay as much as possible by April 15 to reduce penalties and interest on unpaid taxes. Even a partial payment chips away at what you owe.
Set Up a Payment Plan
The IRS knows life happens, and offers payment plans to help:
Short-term plan (under 180 days): Has no setup fees, just interest and penalties.
Long-term installment agreement: (If you need more than six months) you can make monthly payments for up to 72 months.
Apply online at IRS.gov/Payments.
If paying your tax bill would create serious financial hardship, you may qualify for a Temporary Hardship Status, which may temporarily pause collections until your situation improves. If your situation is more dire, you may qualify for an Offer in Compromise (OIC), that allows you to pay an IRS approved settlement for less taxes than you owe.
Take steps to avoid another tax bill next year:
W-2 Employees should check W-4 withholdings to ensure enough is being withheld from each paycheck.
Make estimated tax payments if you’re self-employed or have side income.
Plan for tax-deductible expenses to lower your taxable income.
Owing taxes doesn’t have to be overwhelming! Take action early and set up a manageable plan to keep your financial peace of mind. Need more help? David A. Santini, LLC is here to guide you through the best tax strategy for your situation.