The April 15th tax deadline has passed and you failed to file your tax return or request an extension. Whatever the cause for not filing your return, you must make a decision regarding your next course of action and quickly to remedy the situation. Do not convince yourself that the IRS will simply overlook the matter, in fact the consequences will only worsen the longer you wait to take action.
The most common reason for not filing tax returns on time is when a tax bill is owed. Unfortunately, by not filing your tax return you only add to the tax bill you will be responsible for paying with penalties and interest.
The Failure to File Penalty is 5% per month (up to 5 months) on any unpaid balance, not to mention, you interest accrues at 4% compounded daily. For any unpaid balance, interest accrues at .5% per month normally.
The IRS does not look favorably on individuals who fail to file their income tax return by the deadline, however they will be more willing to work with individuals who take the necessary steps to fix the problem versus those who pretend it doesn’t exist. If you haven’t filed your return on time, the following information can help you back on track and avoid additional fees and penalties.
File Your Tax Return As Soon As Possible
There is no way around it, you must file your tax return even if you are filing it late and you cannot pay any balance on it. Research filing taxes online free. After the deadline passes you no longer have the option to request an extension, therefore the sooner you file your return the better.
Determine How Long To Pay Your Tax Bill
Look at your current financial situation and figure out how much time is needed to pay your tax bill. The ideal scenario would be that you have the resources available to pay your bill in full, therefore eliminating the additional fees and penalties that will accrue over time.
If you do not have the resources on hand to pay your tax bill you should determine how long it will take to repay the money owed. Depending on the amount owed, you can quickly figure out your minimum monthly payment. Normally, the IRS gives you 36 months if you owe $10,000 or less, and 60 months if you owe more than $10,000 but less than $25,000.
Contact the IRS or a Tax Professional to Setup an IRS Installment Agreement
As long as your tax bill remains unpaid, you will continue to accrue penalties and fees that can significantly increase the amount of money owed. By working with the IRS to establish a repayment plan, you can begin making payments to reduce your tax bill, thereby reducing the amount of fees and penalties that are applied to the liability.
Typically, the IRS will reduce the Failure to Pay Penalty by 50% if you have an IRS Installment Agreement setup. However, realize with a payment plan you will still be held accountable for daily interest (currently at 4%), and the the Failure to Pay Penalty (normally .25% per month). The total interest paid with penalties needs to be weighed against a loan, which brings us into the next point.
Consider a Loan
Depending on the amount of money owed and your ability to secure personal financing, you may want to consider borrowing money to pay off your tax bill. Before doing so you should carefully review the terms of any new loans to ensure you are selecting the option that will save you money in the long term and also contrast the total cost for borrowing the money versus setting up a payment plan with the IRS.
It is not uncommon to feel overwhelmed or intimidated when dealing with the IRS and unresolved tax issues. If you have failed to file your tax return on time and do not feel up to dealing with the situation on your own, consider hiring a tax professional to help guide you through the process.
Delaying the inevitable will only result in additional stress on your part and a growing tax bill that will have to be addressed at some point in time in the future. The sooner you face the situation and develop a plan to deal with any taxes owed, the sooner you will be able to resolve the problem and move on with your life.
This guest post was provided by TaxDebtHelp.com, a blog that offers IRS debt help, news, and opinion for individuals trying to resolve tax problems. Visit their blog to learn more.