We’re just days away from April 17th, this year’s personal tax filing deadline. As of this past Thursday, Acting IRS Commissioner David Kautter told Congress that about 75 million refunds totaling $226 billion dollars have been issued so far this year. The good news is the average refund this year is $2,900, which is $13 more than last year.
But what happens if you completed your tax return and owe money, but don’t have the cash to pay it? The IRS says don’t panic. I agree! Here’s what you should do if you owe the IRS, but can’t pay:
- FILE ON TIME – If you think it’s better to avoid filing your taxes until you have the money to pay the IRS, think again. Don’t delay, file your taxes on time. If you don’t, you will be penalized. The penalty for taxpayers who don’t file and owe can start at a minimum of 5% of the unpaid balance each month it’s late to a maximum of 25% of the amount due.
- PAY WHAT YOU CAN – Your tax specialist should be advising you to file your taxes on time and pay what you can. You will face a penalty, but it’s usually just 0.5% for each month the balance remains unpaid.
- GET A LOAN OR USE CREDIT – No one likes to go into debt, but you may want to consider taking out a loan or using a credit card to pay the IRS. If the interest and fees charged by the bank or credit card are less than the expected IRS interest and penalties, this option may be worth it. Talk to your accountant and have him or her work out the numbers for you to see what’s financially beneficial.
- WORK OUT AN AGREEMENT WITH THE IRS – Believe it or not, the IRS would rather work with someone who can’t pay to receive partial payment, then to not receive a payment at all. If you’re facing a business crisis or financial hardship, have your accountant or a tax attorney reach out to the agency for you. You can also log onto the IRS’ Online Payment Agreement tool and file an Installment Agreement Request on your own.
This is it everyone, we’re down to the wire to file personal tax returns. With just days to do it, don’t ignore your taxes. It’s not too late to file or to file for an extension. We can help if you’re still unsure of what to do, so reach out to me or someone on the Brigade Bookkeeping team for advice. The best part is, once you’ve filed, you’ll be relieved you did.
