You fear a big tax bill is coming due. Should you file if you can’t pay?
Maybe you filed an extension in April, in order to delay things. But now the extension deadline is near.
Unfortunately your finances haven’t improved. You’re expecting some extra money may come in within the next month or so.
What should you do? Should you hold off filing your return? Should you wait until you have the money in hand before doing so?
Here’s the deal: You won’t solve the problem by not filing, by delaying, and/or trying to hide from the IRS.
You must pay any taxes due—and they were due back in April, even if you filed for an extension!
An extension to file is not an extension to pay.
You can obtain an Automatic Extension to File, but that doesn’t extend your deadline to pay, if you owe a balance due.
Taxes are due April 15, regardless of whether you file for an extension, or have the money in the bank to pay them.
So you’re already facing penalties and interest. Waiting another month to file won’t clean up your mess, nor help you sleep better at night.
You’ll begin to make progress toward resolving your IRS issue, and
You’ll gain peace of mind for yourself in the meantime.
What will the IRS do?
So what does the IRS do if you file but can’t pay? Well, you’re not the first to face the problem, believe me.
And it’s not like the IRS has never seen this before. It happens all day, every day.
So file your return. Next you’ll get an IRS letter within 2 to 4 weeks. It will state the amount of tax due, plus late fees, penalties, and interest.
You then have 30 days to do something. You have three options:
Pay the balance in full, including interest and penalties. Not likely, I know… but it is one option. (Hey maybe your ship will come in!)
Do nothing… Never a good option when dealing with the IRS.
Set up a monthly installment payment arrangement. If you owe less than $10,000, you can set up an automatic payment agreement to pay the balance off over three years. You can do this directly at the IRS website. But if you owe more than $10,000 the process is a little more involved; you’ll need to either call the IRS and make an arramgement on the phone, or you can submit a Form 9465 Installment Agreement application by mail. (You can Google the form and it will come right up for you, with instructions on how to fill it out and where to send it)
One final thought; you may think you owe a lot of money to the IRS (“a lot of money“ means different things to different people), but then discover when you actually prepare the return that to the balance due is much less than you expected.
My point is this: people get frozen into overwhelm and inaction at the sound of two words: “taxes” and “IRS”. Some folks can’t even get started preparing the return; they’re too afraid. Others prepare a return, but then they don’t file it.
I’ve had people come in to my office with two, three, four and even five years of tax returns to file… and then they’re shocked to find out that they would’ve gotten a refund on one or more of those years.
But because they filed it too late, they’re no longer entitled to the refund!