There are several out there who often forget or probably cannot pay up for their income taxes on time. Even though they file their returns on time, things do not materialize naturally or as expected due to financial problems. There are times when people tend to panic especially when they aren’t informed that there are ways that can be undertaken when it comes to paying the income taxes.
When it comes to the penalties levied on late filing of tax return and late payment of taxes, the latter is known to be lesser than the former, and that is the reason why such an emphasis is laid on filing the taxes first before it is too late. When you fail to file your tax returns, you are to pay 5% of the balance due per month that often goes up to 25%. On the other hand, the failure to pay the taxes on time has a penalty of 0.5% of the balance per month and goes up to 25% depending on the income.
While there is often a penalty levied when people fail to pay their taxes, it can be avoided when they know of alternatives on how to save themselves and pay up for their taxes on time without a fine. It is important for one and all to know of this as it can happen to anyone where certain hurdles prevent them from paying up for their taxes on time.
There are ways that can help you avoid the penalty and save you from a bad name as well as ensure that you do not have to pay as much as expected.
1. Making use of a credit card
Making your tax payments with the help of your credit card when you do not have ready cash available is a great way out. When you pay your taxes with the help of your credit card, it is likely that you may not pay up for the credit at once. Talking and coming to a conclusion on the instalments that you would be paying for as well as deciding on the interest rates could help you sort out the penalties that you would have otherwise had to pay when not being able to pay up for the taxes on time. You could always get in touch with IRS to help you with more information especially when you do not know how to deal with credit card payments for taxes.
2. Look up for an instalment payment plan
When it comes to instalment payment for your taxes, you can always get help from the IRS on this. While filling up form 9465 that is an instalment agreement request, you can make provisions to pay for the tax money in instalments. This saves you from paying up a lot of money at once while making it easy for you to pay for the taxes without having to pay any penalty as such. While you pay with such instalments, there are interest rates levied accordingly but that is something better than the penalty that you would otherwise have to pay for nonpayment of taxes.*
3. Look out for an offer in compromise
There are several out there who cannot pay for their taxes by any chance as their financial conditions don’t allow them to support a credit card nor an appeal for an instalment. This is when the IRS makes certain considerations and reduces the tax amount which acts as a compromise from their end. For this process to come into being, one needs to submit form 656 Offer in Compromise as well as Form 433A Collection Information Statement where bit gets submitted to the IRS along with an application fee.
Once that is done, the one filing for the offer has to provide a financial statement to the IRS where you have to be very clear amount all your assets and liabilities including debts, your salary as well as the amount of money that you are ready to pay when it comes to settling your account for the taxes. The IRS would go through all the documents submitted by you and also check for the further potentials of your income and accordingly make a decision to accept your plea or not for the compromise.
When your plea for your tax payments to be compromised is accepted, the IRS expects you to pay all your federal taxes liabilities on time and not fail to abide by it. This is to continue for the next five years or till the time when the settled amount is paid up with no dues. If you fail to abide by the terms of the Offer in Compromise, you can be fined where all your back taxes would be due and that too in full. The IRS may take a drastic step to file a lien on your asset, and that would have a very bad effect on your credit report. It may prevent you to take loans or probably apply for insurance policies in the days to come.
While these are remedies to help you come out of your problems that could come in the form of nonpayment of tax money. Relying on this solely cannot be the solution at all times. When you have the amount of money that makes you pay taxes, you can always plan and keep aside the required tax amount and not have to rely on other options that take up more money than required. Even though these methods allow you to pay your tax money in instalments, it is something that should be the last option.
Even experts state that there are times when tax payment becomes difficult, but that shouldn’t keep you away from not filing your tax return. This is something that keeps you away from penalties and other financial problems that would reflect on your credit score in the days to come. Whenever it is time for you to file your tax returns, do so before time, and that is likely to do good to you.