Don’t stress if you can’t pay your tax bill by the deadline of April 18, 2023. You still have several options that the IRS offers to help you meet your obligations.
Even if you are unable to pay your full tax bill, it’s important to file your tax return or request an extension of time to file by the deadline of April 18, 2023. By doing this it will help you avoid a failure-to-file penalty.
It is important to note that an extension only extends the deadline for filing a tax return, not the deadline for paying any taxes owed. If you owe taxes you are still required to pay them by the deadline of April 18, 2023 to avoid interests and penalties. Eligible victims of recent natural disasters are given an extension on making tax payments, they have until Oct. 16, 2023. If you can’t pay the full amount of taxes you owe by April 18 it would be in your best interest to file your taxes and pay what you can. Making any amount of payment, even a small amount, may help limit penalty and interest charges.
If you find yourself struggling to meet your tax obligation, the IRS has payment options. If you owe taxes but cannot pay in full by the deadline of April 18, 2023 you can set up a payment plan. No need to wait for a tax bill to be sent to you.
These plans are either short term or long term plans
- Short-term payment plan – The payment period is 180 days or less, and the total amount owed is $100,000 or less in taxes, penalties and interest.
- Long-term payment plan – The payment period is longer than 180 days, monthly payment plan, and the amount owed is $50,000 or less in taxes, penalties and interest. You must be current in all of your tax filings.
Another payment plan option is an offer in compromise. This is a settlement agreement between you, the taxpayer, and the IRS that allows you to pay less than the full amount owed in taxes. To qualify you must be unable to pay your taxes in full or by paying them it would create a financial hardship. The IRS takes into consideration your individual set of facts and situation when deciding on whether or not to accept your offer.
You can go to the IRS website under “Offer in Compromise Pre-Qualifier tool” to see if you’re eligible.
The IRS offers penalty relief. If you tried to comply with tax laws but were not able to because of circumstances beyond your control, you may be eligible and you may qualify for penalty relief.
You may be charged a penalty. If you owe taxes and don’t file on time, you may be charged a failure-to-file penalty, which is usually five percent of the tax owed. This is for each month or part of a month that the tax return is late, up to 25 percent. The failure-to-pay penalty applies if you don’t pay the taxes that you reported on your tax return by the due date.
You may be charged interest. The interest is compounded daily. This means that the interest is based on the amount of tax owed for each day it’s not paid in full! It is calculated by taking the previous day’s balance and adding the interest. Interest rates are determined every three months and can change based on the type of tax it is, individual or business tax.
It’s important to realize that an extension of time to file is not an extension of time to pay. An extension only gives you until October 16, 2023, to file your 2022 taxes, but the taxes you owe are still due April 18, 2023.
Filing Chapter 13 Bankruptcy can help with unpaid taxes by allowing you to reorganize your debt and create a repayment plan that includes the unpaid taxes with 0% interest rate and no additional penalties. The repayment plan can include other types of debts such as credit card debts or medical bills and is paid over a three to five year plan.
There is also the possibility of discharging some older tax debt but this has to be analyzed by an attorney.
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