Every year, millions of people owe taxes. This number has increased due to the tax law changes that went into effect for the 2018 tax season.1 Lower refunds and more tax bills have taxpayers panicking and scrambling to figure out they are going to pay their taxes.
So what happens if you don't pay your taxes? What do you do if you can't pay them? The bad news is that there are some serious penalties if you don't pay them, but the good news is that there are options if you owe the IRS back taxes or you receive a tax bill that you can't afford.
Read on to learn more about your options.
If you don't pay your taxes, you can be subject to liens on your property and assets. The IRS can also seize that property if you still fail to pay and garnish your wages. The most serious cases can result in jail time for failure to pay taxes.
The penalties for not paying are certainly severe, but the IRS is willing to work with you, so your inability to pay your taxes doesn't have to result in punishment this severe.
If you can't pay your taxes, don't panic. You should still file on time and pay anything that you can to avoid penalties and interest, but if you can't pay the amount in full, there are options available to you.
The IRS can give you an extension of up to 120 days to file your taxes. If you know you will owe, you can request this extension to get extra time before your taxes are due.
You will accrue interest and penalties during this time, although the interest rate is quite low. It is currently 3%, which is the lowest it has been in nearly 10 years. There is no setup fee for this extension.
Once you file your taxes, you can request a payment plan from the IRS. This allows you to pay your tax bill over time.
A tax lawyer can help you set up an IRS payment plan and advise you of your options. They can also negotiate on your behalf with the IRS to get a payment that you can afford.
There are setup fees for payment plans and the amount of those fees depends on what type of plan you choose. The setup fee for a payment plan that uses direct debit from your bank account is the least expensive. In addition to the setup fee, there will also be penalties and interest.
An Offer in Compromise allows you to settle your tax bill for less than you actually owe. This is an option if your tax liability is large or paying your taxes would result in undue financial hardship. The IRS will consider things such as your income, ability to pay, expenses, and assets.
The IRS advises that you explore other repayment options before turning to the OIC. Consult with a tax professional to learn more about this option and whether it's right for you.
What happens if you don't pay your taxes? Possible fines, penalties, and prison time. The most important thing to remember is that if you can't pay, don't just ignore your taxes. Make sure you file on time and communicate with the IRS.
Get a tax lawyer today to help you understand your options and communicate with the IRS on your behalf. If you are in a situation where you are facing a tax bill that you can't afford, contact our attorneys today. We can help you resolve any tax issues that you have.