iStock_000014648741_SmallSo you’ve teased out all possible deductions,  sidestepped all of the myths out there and filed your taxes, ON TIME. Go you! Now all you need to do is sit back and wait for your fat refund to come back…right?

Well, maybe wrong. If you’re like 2 out of every 10 Americans this year, you’re not getting a refund; you actually owe the government money. Which means it’s time to pay up. Wait—what?? Yep, the onus is on you to pay. But if you can’t, you might still have some options:

  • First of all, you still have to file. Just because you can’t pay right away, don’t screw yourself more by not filing. You can and will incur massive penalties. Also keep in mind that in most cases you won’t know how much of a refund you stand to gain until you actually file, and you might be surprised: as of late February, the IRS reported that 49.6 million tax returns were filed, and nearly 40 million of those were getting refunds averaging $3,120 each.
  • Let me repeat that: file no matter what. If you file your taxes and don’t pay, you’ll get hit by a penalty of around 0.5% per month on what you owe. Sure, that kinda sucks, but if you don’t file anything at all, that penalty jumps to 5% per month, or 10 times more, up to 25% of your total tax bill. (For example, if you owe $1000, it’s $5/month if you don’t pay but $50/month if you don’t file. Mega difference.) So file, please. And by the way, if you asked for an extension to file your taxes, remember that the extension is to file only; you are still on the hook for whatever you owe the IRS by April 15 no matter what.
  • Make a deal: the IRS may be nicer than you think. In the event of financial hardship, file your return to avoid any late filing penalties and then pay what you can. There are options for installment plans to pay off the rest; you can request an installment agreement using the Online Payment Agreement application, or complete IRS Form 9465. Beware that there is a setup fee depending on the option you choose: $52 for a direct debit agreement; $120 for a standard or payroll deduction agreement; $43 if your income is below a certain level. (Sorry, I know it’s annoying to pay for the chance to not to pay, but that’s how it goes). The IRS considers your income, expenses, and ability to pay when assessing exceptions for financial hardship and you might qualify to settle your taxes for less than the amount you owe—but only if you ask.
  • Don’t ignore your tax bills. Period. If you don’t pay up, the IRS can and will find you—and might place a federal tax lien (aka the government’s legal claim) against your home, personal property and other financial assets…which means they can seize and sell any of your property in the event that you don’t pay your taxes owed. The IRS typically only resorts to a lien if you owe more than $10,000, but still—let’s not tempt them, shall we?
By | 2017-01-23T08:55:04+00:00 April 15th, 2015|Finance 101|0 Comments