What Do You Do When You Owe Taxes But Don’t Have the Funds?

For many people tax season brings the joy of a nice big refund to go out and splurge on something they’ve had your eye on for a long time. On the flip side of the equation are those people who surprisingly, or not, end up owing the IRS money. Not only do these people miss out on the extra cash influx, but they also have to come up with the funds to pay off the extra tax bill.

 For some people, depending how high the bill is, they could have to pay even more than just the shortage amount. That’s because many times when people underpay they end up owing penalties for the underpayment. For those who owe a lot of money, those penalties could end up being huge. In fact, the penalties can even be much higher than the shortage.

That’s why it’s always best to try to avoid owing any money to the IRS, especially if you don’t have the funds to pay it off when the tax bill comes due. So what happens to people who can’t pay their tax bill? You do have a few options.

In some cases, it might be a good idea to take out a loan or a line of credit in order to pay off the bill. Of course, you will then be responsible to pay off the loan, so use caution. Another option is to apply for an extension with the IRS. This could buy you a little time to come up with the needed funds. If you need even more time then try applying for a hardship extension, which could give you up to six months to pay it off. You could also ask the IRS for permission to set up a payment plan to pay off the debt in installments.

Whichever path you decide to take, make sure you do something. Don’t ignore the problem or it will only get worse. The penalties will likely increase the longer you wait and the IRS could eventually take other measures or even press charges. So the bottom line is: do something.

/GROCO
Posted in

The Roth Way to Riches

The Roth Way to Riches By Roy Lewis With all the recent tax-code changes, it seems a number of taxpayers have forgotten the Roth IRA. That’s a shame, because it’s far more than an ordinary retirement savings account. Roth IRAs are tax-favored accounts to which qualified taxpayers can make non-deductible, after-tax contributions. Those contributions can…

executor and trustee

Choosing Your Executor and Trustee

Choosing Your Executor and Trustee You know that it’s vital to make a proper will and keep it up to date. No less critical is the need to select your executor or personal representative with care. You may believe that any friend or relative whom you might select could do the job. Perhaps so. But…

Estate Planning is not One size fits all

Estate Planning is Not “One Size Fits All”

Estate Planning is Not “One Size Fits All” Married, never married, widowed, divorced—each of us has unique needs when it comes to how and to whom we make our bequests. Here, in a brief discussion, are a few checkpoints for developing an estate planning strategy for people who are on their own. Review your will…