Your Business

@ The Entrepreneurial Parent
en-parent.com

    

EP Mailing Lists

Subscribe to our bi-weekly newsletter or join our daily discussion!

Win $100 in prizes!
 

What If You Can't Pay Your Taxes?

Even if you don't have the money to pay your taxes, file your return on time. The penalty for not filing your tax return on time is 5% a month, whereas the penalty for not paying your taxes on time is only 1/2 of 1% per month.

© 1998, by Jan Zobel, EA

You've finally finished filling out the myriad of forms that make up that dreaded packet called The Tax Return. You wish you'd followed the advice you'd read to set aside money for taxes when you sold those stocks and earned that $2,500 doing freelance work. Your tax forms clearly show that you owe and your depleted bank account is of no help. Now what?

Even if you don't have the money to pay your taxes, file your return on time. The penalty for not filing your tax return on time is 5% a month, whereas the penalty for not paying your taxes on time is only 1/2 of 1% per month.

Each year more than 5 million taxpayers file Form 4868, asking the IRS for an extension. However, this is an extension of time to file your tax return, not an extension of time to pay any taxes due. As long as you send it in by April 15, Form 4868 is an automatic extension, giving you until August 15 to file your tax return. Anyone can ask for an extension; there's no need to have an excuse for waiting to send in your return.

If you file an extension, the IRS asks that you give a good faith estimate of the amount you expect to owe and pay whatever you can at that time. Interest and late payment penalties will be added to any additional amount due. For that reason, it's best to send as much as you can as soon as you can.

The IRS has made it easier to pay your taxes by allowing installment payments. If you need time to come up with the money to pay your taxes, Form 9465 (Installment Agreement Request) should be filed with your federal return. Indicate on this form how much you can afford to send each month and on what day you want to pay it. There is a $43 charge to set up the installment plan.

If you owe so much that you can't possibly ever pay it off, the IRS may accept an Offer In Compromise, which means that you offer to pay a lesser amount than you owe in order to settle the bill immediately. You need to fill out a complete financial statement and present it with the appropriate paperwork. Your offer will be accepted only if the IRS believes it will not be able to collect the full amount due from you within the near future. An Offer in Compromise requires that you have available, at the time your offer is accepted, the full amount you've agreed to pay.

Whatever method you use to pay your taxes, the IRS will require that you remain up-to-date with your current tax liabilities. You'll be glad, too, next year if that pre-planning has kept you from being in this situation again.


The above is an excerpt from Jan's recently revised book, Minding Her Own Business: The Self-Employed Woman's Guide to Taxes and Recordkeeping (Adam Media Corporation) which is available for only $8.76 at Amazon.com.

 
 
EP Showcase | Forums | Membership | Directory | Experts | Career Counseling
Mailing List | Resource Center | Books | Articles | Archives | Web Links | Gift Shop
In the Media | Site Contents | Search Site | About EP | Advertise at EP | Link to Us
 
 
 
 
© 2000, The Entrepreneurial Parent, LLC. All Rights Reserved.
P.O. Box 320722, Fairfield, CT 06432 | www.en-parent.com
Please Read Disclaimer Before Using Site | Email: