Federal and state income taxes surprise people every year. Even though Austin residents hear of tax credits, cuts, breaks and refunds, not all of them apply to everyone and many people end up owing a significant amount of money to the Internal Revenue Service. It is important to know that many people are not alone in this situation and there are options available to people to ensure they can pay their taxes without either accumulating a penalty.
First of all, just because a person owes a tax bill, it should not deter that person from filing taxes in a timely manner. A failure to file actually has the highest penalty, which is why it is of the utmost important to file. When filing, people should also calculate how much they owe and how long it will take to pay off the amount. Paying it all off at once is the best option if an individual has the cash available, as the IRS continues to attach late payment penalties until the amount is paid in full.
However, the IRS works with filers who are unable to pay in full by allowing them to pay partially. If the filer knows they can pay it within 45 days, a partial payment can be sent in along with a form known as 1040 V payment voucher with the filing. The remaining amount can be sent after the IRS sends a letter detailing outstanding payments and the IRS gives 30-45 days after sending the letter to make the payment. The process is similar if the filer can pay within four months of filing, but such a filer would need to call the IRS to ask for an extension of the time already included in the letter sent.
If someone needs more than 120 days to make a payment, it may be possible to enter into an installment agreement that can go as long as three years. A person might also need to submit a financial statement to get the plan approved.
Not filing one’s taxes should not be the answer to not being able to pay one’s taxes. There are many options available for filers, including installment agreements tailored to your ability to pay and an experienced attorney can discuss one’s IRS tax law options with them.