You have finished preparing the tax return and notice that you have to pay someone a huge sum, but can’t afford to pay it.
Will you go to jail? Probably not. The realization that you can’t afford to pay your taxes can make you feel uneasy, but don’t worry.
There are things you can do to remedy the situation with the right business accounting services and avoid landing in trouble with the IRS.
File the Return On Time
Even if you don’t have enough money to pay the taxes due, you still need to send in the return by the filing deadline.
The IRS assesses two types of tax penalties: one for filing late and one for failing to pay taxes on time.
Now, the penalty for filing late depends and varies each year. If you can’t pay the tax bill in full on time, you’ll still garner a much lower penalty than you would by waiting to file the return. So bottom line, get the return in by filing deadline if not before.
Also, pay as much of your taxes owed as you can when you file. Even if you can’t pay in full, paying something towards the balance due can reduce the amount of interest and penalties later.
Hire the right tax accountant services Beverly Hills for the best assistance.
Review the option for paying
Whether you owe $100 or $10,000, the first thing you must do is try to find possible sources to obtain the money you need to pay.
For instance, you may consider tapping the equity in your home, using a credit card to pay the taxes, digging into the savings, getting a personal loan, borrowing from friends, or cashing out paid time off at work.
A more extreme option is pulling money out of your IRA or retirement savings. But again, this can trigger its own penalties, so it’s best to view this as the best option of last resort.
Next, if you are considering a loan or credit card o pay the tax bill, remember to weigh the interest rate and fees in the balance.
If you can repay the loan or credit card fairly quickly, or use a credit card with 0% APR, the cost may be minimal.
But if you owe a large tax bill when it comes to business accounting services, the interest may add up really fast. Apart from these, be aware that the IRS charges processing fees for paying income taxes with a credit card, which can increase the total cost.
Start Early Tax Planning!
Do check the timeline
While it’s always the best to pay the taxes, and avail tax accountant services Beverly Hills you owe in full and on time, there are scenarios when all you may need to pay is to get the next paycheck. In such cases, you could file your return and accept the late payment penalty.
As long as you filed the taxes on time, the IRS will send you a letter in the mail stating how much you owe plus additional interest or penalties due.
The downside is that your tax bill will be lingering over the head a bit longer and what you owe will accrue penalties and interest until you pay.
The upside, however, is that the interest you pay will be low compared to financing the money with any source.
However, this is not going to be a long-term solution and your goal should be to pay the IRS as fast as possible, since the longer you wait the more the penalties and interest can add up.
Wait too long to pay and the IRS may take action against you to place a lien against the property or garnish the wages or bank account. The right expert offering you business accounting services can help a lot.
How To Pay The IRS When You Owe Taxes?
You’ve finished the tax return only to realize that you owe money to the IRs. Having a balance due to the IRS is never good news, but you have some options for paying what you owe- even if it’s more than the cash you have on hand.
First, file an extension
Don’t take that completed tax return and your debt to the IRS at face value. You can get an automatic extension of six or more months from the IRS. This gives you 180 additional days to review your return.
Look for deductions you might have missed or miscalculations you have made. Consult a tax professional if you don’t do so before- you might be eligible for a tax credit or deduction that you aren’t even aware of. The idea is to reduce the preliminary tax debt if at all possible.
If you don’t have the money to pay, remit as much as you can. If it ends up that you pay too much-your tax bill is less than you thought it was after you spent some time finalizing the return.
Note, the IRS will send you a refund just as it would if you had overpaid all year through withholding from paychecks.
The tax accountant services Beverly Hills can actually help you file the extension easily.
Meeting the deadline
The most important thing is getting Form 4868 to the IRS on or before the tax filing deadline. Also, the IRS charges a late filing penalty, a late payment penalty, and interest on unpaid balances owed if you don’t file the return or the extension on time and if you fail to pay on time.
It’s better to file the extension and pay as much as you can, and then go back to the drawing board to ensure you really owe all that you think you owe.
Finally, if you can’t pay off the tax debt monthly, or if you owe a lot, it’s better to seek assistance from an experienced tax accountant services Beverly Hills. He would help evaluate the other ways to resolve your tax debts.
The IRS also considers offers in a compromise where it may be willing to accept an amount that’s less than what you owe under some circumstances.
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