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5 Things You lot Shouldn't Practise If Yous Owe the IRS at Tax Fourth dimension

5 Things You Shouldn't Do If You Owe the IRS at Tax Time

While everyone hopes to come out even or get some money back when they file their taxes each twelvemonth, sometimes people do end up owing money – and in that location is a smart way to become about dealing with that. Owing whatever amount of coin to the IRS – big or pocket-sized – is a scary prospect, but ignoring the debt won't brand it go away whatever faster. If you've completed your income tax return for the tax year and you lot're looking at a huge tax bill, it'southward best to take care of it right away. A financial advisor tin can help you figure out what to exercise with your taxes. Here'south a look at what you don't desire to do if y'all're trying to avoid making the situation worse in the long run.

Owing the IRS Mistake #i: Not Filing a Return

If you lot owe taxes and you can't beget to pay, you lot may think that the best thing to do is but not file a return at all. But that's not a practiced idea. When y'all don't file your return on time, the IRS automatically tacks on a v% failure to file penalty for every month you owe taxes, upward to a maximum of 25%. On top of that, you'll also pay involvement on the pecker until you pay it in full.

Owing the IRS Mistake #2: Not Filing an Extension

Requesting an extension gives yous an boosted six months to get your return completed. If you file an extension request earlier the April taxation deadline (the deadline for tax year 2021 is April eighteen, 2022), you lot won't take to worry most the failure to file penalty. You will, nevertheless, notwithstanding owe a failure to pay penalty on any outstanding taxes, which comes to 0.5% of the balance. This penalty is also capped at 25%.

Owing the IRS Fault #iii: Not Setting up a Payment Program

5 Things You Shouldn't Do If You Owe the IRS at Tax Time

The IRS really doesn't want to have to come after you to become the money you owe. To make it easier for taxpayers to pay up, Uncle Sam offers payment plans. If y'all owe taxes and you can't pay, information technology's a practiced thought to find out whether you qualify for an installment program. Yous may be eligible for an online payment plan if you owe the IRS less than $fifty,000 in income taxes, penalties and interest. If you fit that criteria, you lot tin use for a payment agreement online. Otherwise, y'all'll need to fill out Form 9465 and mail it to your local IRS office to see what kind of plan you qualify for.

The IRS gives eligible taxpayers up to 72 months to get their taxation debt paid in full. Keep in listen that involvement and penalties will continue to pile upwards until the balance is paid off. If you're owed a refund in whatsoever subsequent tax years while you lot're on the programme, the IRS tin can subtract those payments from what y'all owe.

Owing the IRS Mistake #iv: Ignoring the Consequences

Bated from the penalties and the interest, there are other things the IRS can exercise to make you regret skipping out on paying your taxes. Your passport could be canceled, for example, which can throw a wrench in your travel plans. In the worst case scenario, the IRS could identify a lien against your property or garnish your wages. Knowing what's at stake can motivate y'all to pay upwards.

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

5 Things You Shouldn't Do If You Owe the IRS at Tax Time

If you don't have enough cash to cover your tax bill, you might be thinking most taking on more debt to practise it. Depending on your situation, that could mean borrowing against your domicile disinterestedness, taking out a personal loan or charging it all to a credit menu. The 1 thing yous don't want to exercise is brand your decision in a blitz. It's a good idea to take the time to compare involvement rates, fees and repayment terms for each option then yous'll know exactly what borrowing to pay your taxes is going to cost you.

Bottom Line

Paying taxes is never pleasant, particularly when you aren't expecting to get hit with a bill you lot can't beget. Facing information technology head-on instead of sticking your head in the sand is the all-time approach if you don't desire to arrive fifty-fifty deeper problem with the IRS. Just make sure you address the problem correct away and figure out a way to arrive right chop-chop, rather than waiting and letting it get worse.

Tax Tips

For help with taxes and any other manner of fiscal questions, consider working with a fiscal advisor. Finding a qualified fiscal advisor doesn't accept to be hard. SmartAsset's gratuitous tool matches y'all with up to three financial advisors in your surface area, and you can interview your advisor matches at no cost to decide which ane is right for you lot. If yous're ready to notice an advisor who tin assist you achieve your financial goals, go started now.
Advance cognition is e'er a expert idea when it comes to attributable taxes. Use SmartAsset'due south tax return estimator to encounter how much you lot will owe or be owed based on your personal finances, and you lot can offset to programme from there.
If you plan to itemize, make sure to keep all your receipts for at least a few years afterwards you lot file. It isn't uncommon for the IRS to look at returns from three to six years prior to the return they are really auditing. And depending on which deductions you accept, similar the home office deduction, your return may be more likely to trigger an audit.

Rebecca Lake Rebecca Lake is a retirement, investing and estate planning good who has been writing nigh personal finance for a decade. Her expertise in the finance niche too extends to dwelling house ownership, credit cards, cyberbanking and pocket-sized business. She's worked directly with several major financial and insurance brands, including Citibank, Observe and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of S Carolina and she besides attended Charleston Southern University equally a graduate pupil. Originally from central Virginia, she now lives on the Northward Carolina coast along with her two children.