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What Are My Options If I Can’t Pay My Taxes? What Should I Do?
Posted By Mr. Money On February 4, 2011 @ 10:12 am In Taxes | 3 Comments
Tax returns are due on April 18th this year because of a holiday weekend. Although we’ll have an extended time to file and pay this year, there are some out there who still aren’t going to have enough money to pay good old Uncle Sam this year. The reasons why people come up short can be numerous, but usually it’s either not withholding enough money from their paychecks, job losses or self employment income that was higher than expected.
The reasons for why you came up short in paying your taxes may not be the important part, but how you’re going to pay. What are you supposed to do if you can’t pay your taxes?
The first thing people often think about doing is just not filing their taxes. While it may feel good to stick your head in the sand, not filing is probably not a good idea because you’ll have to file eventually anyway, and not filing can lead to some hefty penalties for failure to file.
Another reason why you should still file even if you can’t pay is that if you don’t file, the IRS will prepare a return for you. Since the IRS really doesn’t have your best interests at heart, they aren’t going to claim all your deductions and credits for you. Because of that you’ll end up owing a higher tax bill – and increased penalties and fees for failure to file! So not filing at all can increase your tax bill by 20% or even more!
So if you owe money but can’t pay it all, your best bet is to still file, and pay as much as you possibly can in order to reduce any penalties or interest you might have to pay.
One thing to note – even if you file for an extension to file your taxes, you’ll still need to estimate and pay your taxes on April 18th. An extension doesn’t allow you to extend the time to pay as well unfortunately.
If the April 18th deadline is quickly approaching and you don’t have enough capital to pay your bill, there are some options open to you:
Your tax bill isn’t just going to go away, and the IRS never forgets. You don’t want to be on their bad side because they will take you for everything you own. They’ll file a Notice of Federal Tax Lien  that can ruin your credit. They can also seize assets and take funds from bank accounts and paychecks to satisfy the tax debt – without asking. You don’t want to mess around with the IRS, so do your best to take care of your obligations, before they force you to.
Finding out that you owe money at the end of the year is never a pleasant thing, but it is avoidable in most cases. To make sure it doesn’t happen again next year, remember to check these things:
Are you currently in a situation where you’re coming up short to pay a tax bill? Are you going to file anyway, and try to figure out a way to pay?
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URLs in this post:
 Taxes: http://www.smartonmoney.com/go/turbotax
 penalties and interest: http://www.biblemoneymatters.com/missed-tax-deadline-penalties-fees/
 Form 1127: http://www.irs.gov/pub/irs-pdf/f1127.pdf
 Online Payment Agreement (OPA): http://www.irs.gov/individuals/article/0,,id=149373,00.html
 Collection Information Statement (CIS): http://www.irs.gov/pub/irs-pdf/f433a.pdf
 Form 9465: http://www.irs.gov/pub/irs-pdf/f9465.pdf
 Lending Club: http://www.smartonmoney.com/go/lendingclub
 Notice of Federal Tax Lien: http://www.irs.gov/businesses/small/article/0,,id=108339,00.html
 adjust your withholding: http://www.biblemoneymatters.com/adusting-your-paycheck-tax-withholding-to-keep-more-money-in-your-bank-account/
 estimated tax payments: http://www.smartonmoney.com/you-may-need-to-pay-estimated-taxes-if-you-make-side-income-blogging-or-via-other-avenues/
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