Few people really intend to skip paying their annual income taxes. Personal circumstances, whether chosen or unexpected, may have compelled someone to not file a tax return. To put this in context, let’s consider the following: What if you didn’t file on 2009’s or an earlier year’s taxes? What do you do now, going into the 2010 tax season? More importantly, what are the specific consequences and the possible solutions to help fix this situation?
Ideally, you will take action to correct the problem as soon as you can. Don’t fool yourself into thinking that the IRS will somehow “forget” that you’ve not pay your income taxes. If anything, you can count on them addressing that issue in a timely manner. If you’ve chosen not to file (regardless of the reasons) for more than one reasons, the consequences may be much worse. Most of those who do not file do so because they cannot pay the tax bill that is due. Yet not filing is a mistake since you’ll owe more due to penalties and interest. The big penalty, the Failure to File Penalty, is up to 5% a month, up to five months on unpaid balances. This should highlight some big reasons why you need to take action. You may be wondering what kind of action to take. Keep reading because I will share some steps that may help you fix the problem.
Of course the starting point is filing. You must file a tax return even if you’re filing late and can’t pay what you owe. Once the deadline elapses you have no way of getting an extension. This means the faster you get that return sent off the better. The penalties for filing taxes late varies depending upon your situation. It is especially important for those individuals that owe taxes to file ASAP.
Even before that return is in the mail, sit down and figure out what sort of time-frame you will need to get the resources necessary to start paying (or pay off) that tax bill. Certainly, we all want to be able to have the money on hand to pay it off now so we don’t have to pay interest, penalties, and other fees. Most of us can’t count on the ideal. Therefore, we have to think in terms of installment payments. The IRS does have some guidelines regarding payoff ranges. If you owe $10,000 or less, you usually get 36 months. If it is more than $10,000 but less than $25,000 you get around 60 months.
Obviously, if the tax bill is just left out there, you’ll start racking up penalties and fees, making the total amount much higher. If you can talk to the IRS about a repayment plan, then you can get busy reducing the bill. This can be accomplished with the help of an IRS representative or a tax professional. Another option you might think about is to take out a loan. This one may be determined based on different factors as well as your viability as a borrower. If you can get personal financing you can use this loan to pay off the tax bill in full, completing your obligation to the IRS.
It can be overwhelming to deal with the IRS about your unpaid taxes. There’s no doubt about it. On the other hand, if you avoid the issue, you could make it so much worse than if you had simply addressed it. It may have required you to contact a tax agent to help you sort through the problem and figure out the proper course. With a plan, will be able to get back on track – and get the IRS off your back!
If you need help filing unfiled taxes and paying back taxes, we can help! Request a free consultation and one of our tax representatives will contact you and let you know your options.
This post was published on January 21, 2011