Stuck with a whopping bill for Uncle Sam this year that you have no clue how to pay? Hey, it happens. Many Americans are living paycheck to paycheck, so setting aside money for the IRS throughout the year is not always top of mind. Instead of feeling ashamed, however, let’s look at what you can do about it.
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Leslie Tayne, founder and head financial attorney of Tayne Law Group, explained what to do if you find yourself in this predicament this tax season.
Also see specific steps for lowering your tax bill before filing.
File on Time
Tayne emphasized that ignoring your taxes creates larger problems than filing without payment. So even if you can’t pay the tax bill, make sure your file on time.
“The IRS is generally more lenient with late payments than late filings,” Tayne said. Be advised, however, that penalties and interest still accrue.
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Research Payment Plans
Payment plans are available if the full tax bill cannot be paid upfront. Tayne explained that taxpayers may qualify for installment agreements, allowing them to pay the balance over time.
Additionally, some individuals may even be eligible for what is known as an offer in compromise (OIC), allowing qualified taxpayers to settle the debt by paying a smaller sum. The latter option, however, is more difficult to qualify for and generally requires working with an attorney who can help you navigate the process, which is another expense.
Apply for Temporary Hardship Status or Penalty Relief
Hardship status temporarily pauses IRS collection efforts, while penalty relief may help reduce certain fees. In both cases, interest still accrues, therefore increasing the balance over the long run, but one’s standing with the IRS remains intact.
Tayne explained that qualifying for these options generally depends on taxpayers’ income, assets and overall financial hardship.
Don’t Put Your Tax Bill on a High-Interest Credit Card
“I see clients who want to make their taxes ‘go away’ so they charge the bill to a credit card or take out a loan to pay them, and end up stuck in the debt cycle for years,” Tayne said. In other words, the problem does not go away. It gets much worse.
It’s important to remember that if you can’t pay your taxes in full, you’re not alone. The IRS has additional options available that won’t result in digging your financial hole even deeper.
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This article originally appeared on GOBankingRates.com: Here’s What To Do If You Can’t Pay Your Tax Bill, According to an Expert
