Even though tax season has already passed, many taxpayers still remain quite stressed about their financial situation. This is often the case when you owe taxes that you can’t pay, which means you’ll be faced with the prospect of costly penalties until your taxes are sufficiently paid off. H&R Block explains a few steps you can take if you’re unable to remit the taxes you owe.
First and foremost, never ignore your tax bill. This will only make the problem monumentally worse and will add on to the amount you owe the IRS. If your current financial situation is dire, you can apply for currently not collectible (CNC), which is an option for people facing financial hardships. In this case, the IRS would suspend taxes owed for a certain period until your financial situation improves. This entails a thorough review of your financial standing so that the IRS can determine whether you qualify for CNC status. Once you become financially stable, the IRS will expect you to begin remitting payment.
You may also be applicable for a payment plan. Instead of paying one large lump sum, which can be quite impossible for most people, you can pay off your taxes in installments. There are a variety of installment plans available. Depending on your situation, a simplified plan may be right for you, or you might need to apply for a more complex plan. In this case, the IRS will request certain documents before the installment plan can be implemented.
For people who own very few assets and are struggling cover crucial daily living expenses, an offer in compromise might be the best option. This allows your tax amount to be decreased so it’s easier to pay. The IRS will determine your ability to pay by looking at your income and other factors, and from there will make a determination on whether your tax burden should be cut down. An offer in compromise can also be afforded when you dispute the amount owed. If so, the IRS will perform an audit to determine whether your claim has any merit.