What To Do If You Can't Pay Your Taxes
NEW YORK (MarketWatch) -- Is your tax liability more than you can handle right now? Don't ignore it -- it's not going to disappear. So don't forego filing your tax return just because your wallet is a little light at the moment -- you'll end up paying more later.
According to J.K. Lasser's income tax guide, simply filing your return, even without a full payment, will save you cash in late-filing penalties. If you don't do so, get ready for escalating penalties and possible liens against your assets and income. In really bad cases, you could face seizure and sale of your property.
If you can't pay the full amount owed, you do have some options.
Set up an installment agreement with the IRS.
If you owe $25,000 or less, this could be right for you. You will sill have to pay interest and a late-payment penalty on the taxes you owe, however. But if you file your returns in time, you won't be hit with the failure to file penalty. To request the installment agreement, attach Form 9465 to your return. You will be charged a user fee of $105 ($52 if the payments are deducted directly from your bank account.) You will have to pay the money owed within five years and you must promise to pay future liabilities on time.
You can also consider borrowing the money to pay off your tax liabilities.
You won't have to pay penalties or interest to the government, but if you're using a bank loan weigh the amount of interest you'll be paying there.
By Marshall Loeb