What happens if you owe on your taxes and don’t pay by tax day? You could face penalties and interest from the IRS, and no one wants that kind of attention. No matter what you do, don’t ignore the problem. Even if you can’t pay the full amount on tax day, you’re better off filing for an extension and looking at your options.
When you fail to file, you’ll be hit with a 5 percent penalty that continues every month until you file—up to 25 percent of your total unpaid tax bill. If your failure to file is due to fraud, that penalty increases to 15 percent. The failure to pay penalty starts at 0.5 percent of your balance due per month, and is capped at 25 percent of your unpaid taxes. This can all add up fast, and before you know it, you could be looking at a very hefty bill. If you owe taxes or need tax debt help in Des Moines, IA, consult a professional at Accounting & Tax Professionals, PLC.
Here are some of the options you can consider if you owe taxes:
- Set up an installment agreement: The IRS will allow you to pay your tax bill on an installment plan. The terms will depend on how much you owe and how soon you estimate you can pay, but there are options for low-income taxpayers. You do need to apply for the payment plan, and should be aware that there is a spectrum of fees involved.
- Request a short-term extension: If you think you can pay your bill within 120 days, apply for a short-term extension. This reduces the late fee to 0.25 percent per month, and interest is charged at 3 percent until the balance is paid. If you don’t pay it on time, of course, the IRS reserves the right to void the agreements.
- Request a hardship extension: If paying the taxes you owe would be a financial hardship—at least in terms of how the IRS defines it—then you may be eligible for a hardship extension. There are no penalties involved, but the 3 percent interest rate will still apply.
- Borrow the money, or use credit: Finally, there’s one last option: borrowing the money. Credit cards can help you, but be careful to check the interest rate if you won’t be able to pay it off before the bill is due. You can also borrow against your 401(k), but that’s capped at 50 percent or a maximum of $50,000, depending on your plan. And there are always personal loans from banks or family members, but we suggest reviewing any fees and interest thoroughly before agreeing.
If you owe taxes in Des Moines, IA, your best course of action is to consult a trusted tax professional today. Contact the team at Accounting & Tax Professionals, PLC. We offer tax debt help in Des Moines, IA, along with a host of other personal finance and tax services. We can help you find solutions to your tax problems.