Tax Day has passed and yet not all taxpayers have filed or paid their taxes. According to the most recent data, the United States Internal Revenue Service (IRS) estimates that Americans owed more than $114 billion in back taxes from the 2020 tax year. These numbers mean millions of taxpayers are falling behind on their tax payments. Reasons range from simply not making the time to file and pay taxes to ignorance. Still others simply cannot afford the bill.
What should I do if I cannot pay my tax bill?
There are options. In some cases, the Internal Revenue Service (IRS) will approve a payment plan, referred to as an Installment Agreement. The process varies depending on the amount owed. Those who owe less than $25,000 and can pay off the bill within five-years can qualify for a streamlined approval process and move forward with the program relatively quickly. There is generally an additional interest and penalty applied to the balance. The late payment penalty can range from 0.5% to 0.25%.
In other situations, the feds may accept an Offer in Compromise. This program allows the taxpayer to pay off as much of the tax bill as they feasibly can, and the IRS forgives the remaining balance. The IRS will review your finances to see if you qualify, taking both current and future earning capacity into account when making their determination.
How do I know the right choice for my situation?
It is important to take the risks and benefits of each program into consideration when making your decision. Other options are available and can include penalty abatement or even bankruptcy. The attorneys at Goldburd McCone LLP are experienced in these conversations and can help you decide what is best for you.