What To Do When Taxes Are Due And You Are Broke
Taxes come due every year at the same time and many of us plan for them by saving up money to pay the amount we owe. That being said, what happens when tax season rolls around and you don't have any money to pay?
It is hardly a secret that the last two years have been absolutely brutal from a financial perspective. Most of us have been focused on surviving, not paying our taxes. This is understandable, but there is no doubt that the IRS is going to want the money due to the government. Given the rates the government has been spending money, it is nearly desperate to maximize the revenues coming in.
So, what do you do if you can't meet the tax bill? Well, the first thing not to do is panic. If we are talking about the April 15th deadline, you can file an application for extension. The extension is automatically granted and it gives you an additional six months to file. Technically, you are supposed to still pay the tax you owe, but most people just wait until they actually file their return. This will require you to pay penalties and interest, but it usually isn't too bad.
Okay, the extension period runs out and you still don't have enough to pay your taxes. What do you do? The first step is to go ahead and file your tax return. As long as there is a return on file, the IRS will usually play nice. Failing to file suggests you are a tax dodger and the IRS will not treat you particularly nicely when it gets a hold of you. Ah, but what about the taxes due? Well, you can apply for a payment agreement. The IRS will allow you to pay the tax over time in monthly payments. You'll have to pay interest and penalties as well, but the monthly payment should be fairly low and give you some breathing room.
Ultimately, there is plenty of wiggle room when it comes to dealing with a cash flow problem when taxes are due. The key is to stay engaged in the system. As long as the IRS thinks you are making an effort to pay, the agency will leave you alone.
It is hardly a secret that the last two years have been absolutely brutal from a financial perspective. Most of us have been focused on surviving, not paying our taxes. This is understandable, but there is no doubt that the IRS is going to want the money due to the government. Given the rates the government has been spending money, it is nearly desperate to maximize the revenues coming in.
So, what do you do if you can't meet the tax bill? Well, the first thing not to do is panic. If we are talking about the April 15th deadline, you can file an application for extension. The extension is automatically granted and it gives you an additional six months to file. Technically, you are supposed to still pay the tax you owe, but most people just wait until they actually file their return. This will require you to pay penalties and interest, but it usually isn't too bad.
Okay, the extension period runs out and you still don't have enough to pay your taxes. What do you do? The first step is to go ahead and file your tax return. As long as there is a return on file, the IRS will usually play nice. Failing to file suggests you are a tax dodger and the IRS will not treat you particularly nicely when it gets a hold of you. Ah, but what about the taxes due? Well, you can apply for a payment agreement. The IRS will allow you to pay the tax over time in monthly payments. You'll have to pay interest and penalties as well, but the monthly payment should be fairly low and give you some breathing room.
Ultimately, there is plenty of wiggle room when it comes to dealing with a cash flow problem when taxes are due. The key is to stay engaged in the system. As long as the IRS thinks you are making an effort to pay, the agency will leave you alone.
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