It’s that time again in America. The final deadline for filing your taxes looms large. People who got extensions will have to file their taxes by October 15th and that day looms large for those who owe. You’ve done your taxes and gotten to the bottom line. You owe… way more than you have in your bank account.
File your taxes anyways.
The IRS, horrible as they are, won’t start harassing you for money on April 16th or July 16th or even October 16th. They likely haven’t posted the returns that have been filed yet, especially in years like this with COVID lurking in office buildings.
There are serious advantages to filing your return, even if you don’t have the money to pay right now. In fact, filing your return and starting the clock has way more advantages than hiding behind the fact that you don’t have the money to pay.
Payment plans available
The number one thing you can do is send in what you can. It lowers your tax debt and the penalties and interest that will accrue on that debt from the word go. Look, the IRS is greedy. They just want your money and they want all they can manage to get from you. That’s how the government is. Send them what you can, when you can. You don’t have to enter into an installment agreement with the IRS. Just make sure that when you send in your payments, you notate your social security number, name and what year you want the money to go to on your check.
If you’re really in need (for whatever reason) of a formal payment plan with the IRS, you can set one up online so long as you owe less than $50,000.
Additional penalties for failure to file
If you don’t file a tax return and don’t get an extension, you’ll be up the creek without a paddle. You’ll be smacked with a separate penalty for failure to file the return. That’s on top of the penalty you’ll pay for failure to pay as required. Trying to hid from the IRS is way more expensive than doing the right thing.
Filing returns starts the clock
On the escape option that is. Taxes aren’t eternal. Yes, I said that and it’s true. Taxes can go away after time. There is a statute of limitations on taxes that can make them uncollectable.
There’s also the silver bullet, Bankruptcy.
Bankruptcy law allows you to discharge certain taxes that are of a certain age before they can even expire.
But there’s a catch. You have to file. The clock doesn’t start ticking until you file your tax return. That’s why filing, even when you can’t pay, is supremely advantageous.
You need to adjust your withholdings
The final reason why you need to get last year’s return ready is that you need to get your withholding right for this year. Even an extension can cause problems because it delays your ability to adjust your withholding on your W-4 to account for the fact that you owed this year. You want to adjust your withholding so you don’t have to pay out of pocket again next year when everything is said and done.
The bottom line is, hiding from a problem isn’t going to make it go away. Especially if that problem is with a government agency as nasty as the IRS. If you owe back taxes and you can’t pay them, contact the attorneys at Harmon and Gorove to see how bankruptcy can help you get a handle on your tax debt. We have a dedicated team of professionals that understand your rights under bankruptcy and how they can help eliminate tax debt.