When you consider the job losses, businesses shuttered for months, and unexpected medical bills, being low on funds to pay what you owe the IRS is a dilemma many may be facing.
One viewer tweeted us: “I’m in that area. I was one of the small business’ to deal with not taking a loan. Now I owe about 14K with a depleted bank account due to keeping my employees working.”
CAN'T PAY? DON'T PANIC
“I have people that I deal with, and they cannot pay anything,” said Stuart Sherman -- a tax attorney and principal at Tax Resolve in Bloomfield Hills.
He says he’s hearing from many people who’ve used the money they’d set aside for taxes to make ends meet over the last couple of months.
His advice? No matter what, you should always file on time.
“The penalty for not filing your return is 5% a month of what you owe. But if you file your return and you just owe money, it’s a half a percent. So, there’s a significant incentive to file timely,” Sherman explained.
He says if you owe money, but you can’t afford to pay by July 15 – don’t panic.
You can go on the IRS website and apply for a payment plan.
Thisinstallment agreement request – once approved -- sets up a direct debit agreement which Sherman said is the cheapest way to go – as sending monthly checks comes with a higher set-up fee.
You create a user name and password on the IRS websiteto access this. It is separate from your filing.
ARRANGE A PAYMENT PLAN
If you want a short-term extension of a few months or to discuss other payment options, Sherman recommends you call the IRS as soon as possible to arrange a plan to pay your taxes.
CALL THE IRS TO DISCUSS PAYMENT OPTIONS: (800)829-1040
“You’re always better off making some payment because interest and penalty are running on that amount you owe. So even if it’s just 10-dollars a month, at least you’re making some progress towards it, and the interest and penalty are not out there compounding,” explained Sherman.
But if you’ve lost your job permanently, and you’re asking for a short-term deferral or to report your tax debt as currently “not collectible,”Sherman said that’s a little more involved.
“There would be some financial information you’d have to provide to the IRS. And that’s when you do want to consult with a professional before you get involved with that,” he said.
Take note -- if you’re submitting additional financial information to the IRS, make sure it’s accurate because you’re signing those forms under penalties of perjury.
Sherman cautioned, “You don’t want the IRS coming back and saying that you didn’t fully disclose your information, therefore we’re defaulting you, and we want all our money right now.”
FILE ON TIME
Bottom line: You must file that return – with any additional requests – by July 15, 2020.
Sherman agreed that the worst thing to do is to try to ignore your tax dilemma.
“That’s the surest way to get yourself into deeper trouble,” he said.
Extending the tax filing deadline to July 15 may have helped some taxpayers, but Sherman said some homeowners may also have property taxes due in August or September. So, they may be facing the double-whammy of having to write a check to the IRS and to their municipality in a short amount of time.
If you have questions about your federal income tax return or payment concerns, you can reach the IRS at (800)829-1040. You may also go to www.irs.gov.