Thousands of people across the country find themselves dreading mid-April each year—not because of allergies, not because of Spring Break traffic, but because taxes are due and finding the money to pay them can seem impossible. Business owners, contractors, and the self-employed have a particularly difficult time with tax season because they’re required to save for taxes on their own.
Daily expenses may take priority over saving for taxes, but when tax season rolls around, panic sets in, and the IRS has little sympathy for individuals who don’t pay on time. You can find yourself in serious legal trouble if you evade your tax payments for too long.
Steven, a forty-three-year-old mechanic living in Michigan, was being audited by the IRS because he owed over $10,000. It wasn’t that he was trying to break the law, but he had no way to pay off his debt unless he wanted to lose his business and go homeless. He eventually reached his breaking point when he knew it was only a matter of time before the IRS would arrest him. A tax attorney in Detroit helped him assess his payment options.
Get an Extension
Getting an extension is the first possible option to consider when you can’t pay your taxes. If Steven would’ve communicated his money troubles with the IRS by filing an extension on the front end as opposed to missing the deadline completely, the IRS would’ve been more understanding of his situation. Filing an extension can buy you some time to get your bearings and work out a payment plan.
Make an Installment Agreement
You can file an Installment Agreement Request with your tax return in which you suggest your own payment terms regarding your debts to the IRS. Similar to a loan, you may suggest paying off a certain amount each month over a specific period of time.
The IRS may charge you a low-interest rate to set up an installment agreement, but this is a much better option than getting a loan elsewhere. You’ll receive an answer from the IRS on whether they’ve accepted the terms of your installment plan within thirty days.
Find a Short-Term Solution
If, unlike Steven, you have a smaller amount of debt to pay the IRS but you simply can’t pay it by the deadline, you may consider a short-term solution such as using a credit card to pay your debts or paying what you can on tax day and letting the IRS bill you for the rest plus a small amount of interest.
The worst thing you can do during tax season is panic and avoid your taxes altogether. While the IRS doesn’t have much sympathy for those who can’t pay, they may try to work with your situation if they see that you’re making an effort. Ultimately, you’ll need to keep your head up, make a plan, and know that all hope is not lost.