NEW YORK — During the tax season, even if you find yourself unable to pay the full amount of taxes owed, it is crucial to file a return or request an extension. This advice is strongly emphasized by tax professionals aiming to guide taxpayers effectively.
“Engaging with the IRS is essential,” explained a representative from the National Association of Tax Professionals. “To receive assistance, they need your financial details. Filing your return is an essential step, and owing money shouldn’t deter you from doing so.”
Neglecting to file a return or to ask for an extension leads to immediate accumulation of interest and penalties. Such expenses are generally avoidable when you communicate your situation promptly with the IRS. Filing a return without full payment is more favorable than failing to file altogether.
To clarify, even if an extension is granted until October, interest will still accrue from April 15 on unpaid taxes. However, this interest is less burdensome than the penalties for not paying any taxes. Emily DiVito, an economic policy adviser, stresses the importance of filing or requesting an extension to avoid future liabilities.
So, what occurs if taxes aren’t paid? The IRS may increase interest and penalties, and actions such as garnishing wages or placing a lien on property could occur. They might even restrict passport access. Filing for an extension or submitting your return with available financial data can prevent these issues. Even partial payment by April 15 can be beneficial.
Are there any no-cost resources to aid in filing extensions or setting up payment plans? Nationwide, Volunteer Income Tax Assistance (VITA) locations offer free support for filing returns or setting up extensions. Volunteers can guide you in establishing a manageable plan to pay owed taxes over a 72-month period. The IRS Direct File program is also an available free resource.
“Faced with uncertainty when paying taxes, remember that refunds and credits are often available if taxes are filed,” conveys DiVito. “Most working individuals tend to receive refunds, but these require filing your taxes.”
Could there be other outcomes? In cases of severe hardship, the IRS might classify an account as “currently-not-collectible.” Sharing income and expense information with the IRS can help determine qualification for this status.
O’Saben provides an example: “If illness leads to job loss and medical bills, communicate with the IRS for relief options. It’s challenging to address financial difficulties, but dialogue with the IRS is crucial for possible assistance.”
In exceptional scenarios, the IRS might settle for a lower payment than owed through an “offer in compromise.” VITA professionals can assess your eligibility, and the IRS offers a free online tool for this purpose.
What if last year’s taxes weren’t filed? Initiate the process now. It’s a common issue, notes O’Saben, often caused by fear of owing taxes. However, avoidance won’t resolve the matter. Transparency with the IRS allows for collaborative resolution. Echoing this sentiment, Miklos Ringbauer, a tax professional, reassures that the IRS is equipped to handle any situation, having seen a variety of cases.
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