What if you owe?
Everyone loves getting a refund. Not difficult to deal with that, just have them do a direct deposit (usually takes 8-14 days) or send you a check, takes about ten days longer.
But if you owe, it gets a bit more complicated if you don't have the money to pay them.
If you have the money to pay them, no problem, just a groaner when you write the check. You can use a credit card to pay your taxes, but it is an expensive way to go. There is an extra charge ( about 2-3%) and usually credit card companies charge higher interest rates than the IRS.
But what if you don't have enough money to pay? That is where you have some options.
YOU MUST FILE YOUR RETURN BY APRIL 15th .. this is very important because if you don't the IRS can impose a 5% per month penalty for five months. You can't just file an extension either because for an extension to be valid you have to pay what you owe with the extension.
When you file, then you have a choice of making installment payments. The IRS charges a fee.
"A one-time installment agreement fee of $105 will be
charged when you enter into an installment agreement unless you choose to
pay through a Direct Debit from your bank account, in which case the fee is
$52.00. Taxpayers with income at or below 250% of the Department of Health
and Human Services poverty guidelines can apply to pay a reduced user fee
If the amount owed is less than $10,000 these are almost always approved.
Keep in mind that the IRS just wants to collect. Filing this form shows an intent to pay. If you make the payments as scheduled, then you should never hear from them. If you fail to meet the payments, then you may go into collection, something you want to avoid.
If you think you can pay in a few months, then the following applies.
"Can you pay in full within 120 days? If you can pay the full amount you owe within 120 days, call 1-800-829-1040 to establish your request to pay in full. If you can do this, you can avoid paying the fee to set up an installment agreement.Instead of calling, you can apply online."
What if you are in really big trouble. You owe more than you think you can possibly pay.
Your choices are to do nothing which will result in liens on your property and garnishments from your wages, file an Offer in Compromise (OIC) or file bankruptcy.
OIC's are complicated to file and contrary to what you might hear on ads, they don't necessarily result in what you might think. Keep in mind that pennies on the dollar could be 80 cents. In the past often these were settled for less than 20 cents, but the IRS has toughened their stance on these.
It is expensive to file these as well as time consuming. But they are an alternative to bankruptcy, which is as a rule more expensive and does not necessarily get rid of all of your owed taxes.
Enrolled Agents and CPA's can handle OIC's. For a bankruptcy you need an attorney.