- Corporate Taxes Are 10 Percent of Federal Revenue, Down from 30 Percent
- Why You Should Hang Up if You Get a Call From the ‘IRS’
- Why Corporations Pay Less Taxes Than You, Part 2
- Banks Make $1 Billion Helping US Firms ‘Move’ Overseas
- Medicare Isn’t Going Broke (Yet)
- Save on Back-To-School Supplies by Shopping Sales Tax Holidays
- Why Corporations Pay Less Taxes than You
- One Court Ruling Shoots Down Obamacare, Another Backs It Up
If you were due a tax refund this year, it’s hopefully already resting comfortably in your savings account. If you owe, however, you’re probably waiting till the last minute. Nothing wrong with that. But if you don’t have the money, perhaps you’re tempted to not file your return just yet.
Fight that temptation. If you owe Uncle Sam, you’re always better off filing your taxes, even if you don’t have a dime to send in with that return. Ten times better off.
Watch this brief news story, then meet me on the other side for more.
To underline what you learned in that story: If you file without paying, your penalty is .5% per month. It’s called a failure to pay penalty. But if you don’t file at all, you’ll be paying the failure to file penalty, which is 5% per month: ten times more. So if you owe a thousand dollars and file without sending in a check, you’ll owe Uncle Sam $5 a month until you send in what you owe. But if you don’t file at all, the penalty is $50 a month with a five-month cap.
So always file. And if you can’t pay, consider other options: for example, a loan from family or friends. An advance from your job. A short-term loan from a bank or credit union. But try to avoid credit cards. You can pay that way, but it’s not cheap. The convenience fee is normally 2.5%, plus whatever interest your card charges.
Another option is to work out a payment plan with the IRS. As I said in the above news story, they may not be as tough and inflexible as you expect, especially if your inability to pay arises from the loss of a job, illness or other hardship. Here’s a recent statement from IRS Commissioner Doug Shulman:
“We need to ensure that we balance our responsibility to enforce the law with the economic realities facing many American citizens today,” Shulman said. “We want to go the extra mile to help taxpayers, especially those who’ve done the right thing in the past and are facing unusual hardships.”
How can the IRS help? Here’s some information from their website:
- Postponement of Collection Actions: IRS employees will have greater authority to suspend collection actions in certain hardship cases where taxpayers are unable to pay. This includes instances when the taxpayer has recently lost a job, is relying solely on Social Security or welfare income or is facing devastating illness or significant medical bills. If an individual has recently encountered this type of financial problem, IRS assistors may be able to suspend collection without documentation to minimize burden on the taxpayer.
- Added Flexibility for Missed Payments: The IRS is allowing more flexibility for previously compliant individuals in existing Installment Agreements who have difficulty making payments because of a job loss or other financial hardship. The IRS may allow a skipped payment or a reduced monthly payment amount without automatically suspending the Installment Agreement. Taxpayers in a difficult financial situation should contact the IRS.
- Prevention of Offer in Compromise Defaults: Taxpayers who are unable to meet the periodic payment terms of an accepted OIC will be able to contact the IRS office handling the offer for available options to help them avoid default.
And that’s just some, not all, of the things the IRS is willing to do to help those in need. So if you currently owe money for back taxes, or are about to, check out this IRS web page for more information, or just call the IRS and talk to them.
One other great resource I encountered while researching this story was an article, Selecting an IRS Payment Plan If You Owe Tax And Cannot Pay in Full, from the folks at Personal Dividends. If you’d like to know more about different types of IRS installment plans, read it.
Bottom line? It’s human nature to ignore problems and hope they go away: especially when the solution is elusive. But if you owe money to Uncle Sam, the problem isn’t going away, and ignoring it is going to make it worse. And the solution may be less stressful than you think, especially if you’re sick, out of work or otherwise down on your luck.