What You Shouldn’t Do If You Owe the IRS – SmartAsset

While everyone hopes to come out even or get some money back when they file their taxes each year, sometimes people do end up owing money – and there is a chic way to go about dealing with that. Owing any sum of money to the IRS – big or modest – is a chilling candidate, but ignoring the debt won ’ t make it go away any fast. If you ’ ve completed your income tax return for the tax class and you ’ rhenium looking at a huge tax bill, it ’ second best to take care of it right away. A fiscal adviser can help you figure out what to do with your taxes. here ’ s a expression at what you don ’ t want to do if you ’ re trying to avoid making the situation bad in the long move.

Owing the IRS Mistake #1: Not Filing a Return

If you owe taxes and you can ’ deoxythymidine monophosphate afford to pay, you may think that the best matter to do is just not file a return at all. But that ’ s not a good idea. When you don ’ metric ton file your hark back on time, the IRS mechanically tacks on a 5 % bankruptcy to file penalty for every calendar month you owe taxes, up to a maximum of 25 %. On exceed of that, you ’ ll besides pay concern on the bill until you pay it in full.

Owing the IRS Mistake #2: Not Filing an Extension

Requesting an extension gives you an extra six months to get your recurrence completed. If you file an elongation request before the April tax deadline ( the deadline for tax year 2021 is April 18, 2022 ), you won ’ deoxythymidine monophosphate have to worry about the failure to file punishment. You will, however, still owe a failure to pay penalty on any great taxes, which comes to 0.5 % of the libra. This penalty is besides capped at 25 % .

Owing the IRS Mistake #3: Not Setting up a Payment Plan

The IRS truly doesn ’ t want to have to come after you to get the money you owe. To make it easier for taxpayers to pay up, Uncle Sam offers payment plans. If you owe taxes and you can ’ deoxythymidine monophosphate pay, it ’ s a good mind to find out whether you qualify for an installation design. You may be eligible for an on-line requital plan if you owe the IRS less than $ 50,000 in income taxes, penalties and interest. If you fit that criteria, you can apply for a requital agreement on-line. otherwise, you ’ ll need to fill out Form 9465 and mail it to your local anesthetic IRS function to see what kind of plan you qualify for.

The IRS gives eligible taxpayers up to 72 months to get their tax debt paid in full. Keep in mind that pastime and penalties will continue to pile up until the remainder is paid murder. If you ’ re owed a refund in any subsequent tax years while you ’ re on the plan, the IRS can subtract those payments from what you owe.

Owing the IRS Mistake #4: Ignoring the Consequences

away from the penalties and the interest, there are other things the IRS can do to make you regret skipping out on paying your taxes. Your pass could be canceled, for example, which can throw a wrench in your travel plans. In the worst shell scenario, the IRS could place a lien against your property or garnish your wages. Knowing what ’ s at stake can motivate you to pay up .

Owing the IRS Mistake #5: Choosing the Wrong Way to Pay

If you don ’ t have adequate cash to cover your tax bill, you might be thinking about taking on more debt to do it. Depending on your situation, that could mean borrowing against your home equity, taking out a personal lend or charging it all to a credit card. The one thing you don ’ thymine want to do is make your decision in a first-come-first-serve. It ’ s a good estimate to take the time to compare concern rates, fees and refund terms for each option so you ’ ll know precisely what borrowing to pay your taxes is going to cost you .

Bottom Line

Paying taxes is never pleasant, particularly when you aren ’ deoxythymidine monophosphate expecting to get hit with a bill you can ’ deoxythymidine monophosphate afford. Facing it head-on alternatively of sticking your head in the backbone is the best set about if you don ’ triiodothyronine want to get in even deeper trouble with the IRS. Just make certain you address the trouble correct away and figure out a means to make it veracious promptly, rather than waiting and letting it get worse .

Tax Tips

  • For help with taxes and any other manner of financial questions, consider working with a financial advisor. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Advance knowledge is always a good idea when it comes to owing taxes. Use SmartAsset’s tax return calculator to see how much you will owe or be owed based on your personal finances, and you can start to plan from there.
  • If you plan to itemize, make sure to keep all your receipts for at least a few years after you file. It isn’t uncommon for the IRS to look at returns from three to six years prior to the return they are actually auditing. And depending on which deductions you take, like the home office deduction, your return may be more likely to trigger an audit.

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