Tax Fear # 6
Afraid to file because I cannot pay what I owe.
I understand. I really do. You are afraid of the consequences for not having the money to pay when you file your return. I get that. But you have to understand that the consequences for not filing can be much scarier than what could happen if you file and can’t pay. Trust me, the IRS penalty for not filing is actually worse.
It is not a crime to file your tax return and not pay what you owe. By saying that, I mean that the IRS will not have you arrested because you didn’t have the money at the time you filed your tax return. However, you will face much harsher financial consequences by not filing at all and not paying what you owe.
If you owe tax and don't file on time, the late-filing penalty is usually 4.5 percent of the tax owed for each month, or part of a month, that your return is late. However, if you file on time but just can't pay your tax bill then, you'll generally face a late-payment penalty of only one-half of 1 percent of the tax owed for each month, or part of a month, that the tax remains unpaid.
The total nonfiling and nonpayment penalties could reach a cumulative 25 percent maximum penalty. But if you file your forms on time and then make arrangements to pay, you can avoid taking that hardest tax penalty hit.
Trust me, it’s in your best interest to file your tax return and if you find yourself in a situation where you cannot afford to pay the bill, Uncle Sam will work with you. The IRS can set up an installment agreement with you so that you can pay off the debt over time. If you file and cannot pay, there are options. If you do not file at all, you will end up screwing yourself in the end.
IRS Penalty Abatement- Can You Really Get Rid of Penalties?
Friday, October 31, 2008
Tax Fear # 6