Its April 15 and you cant pay your tax bill
DALLAS - The Internal Revenue Service is making extra efforts to help taxpayers this tax season, but there are some things you should know if you can't pay your entire tax bill.
"The IRS recognizes that many folks may be going through some tough financial times right now," said Clay Sanford with the Dallas IRS office. "Unfortunate events such as job loss or tapping a retirement fund can obviously have an impact on taxes."
Sanford said that doing some research at IRS.gov can pay off for some folks. For instance, if your income decreased because of a layoff or a cut in wages, you may be eligible for certain tax credits, such as the Earned Income Tax Credit.
Most importantly, if you believe you may have trouble paying your taxes, contact the IRS immediately. There are steps that can be taken to help ease the burden.
"You should file a tax return by April 15 even if you are unable to pay so you can avoid additional penalties, Sanford pointed out. "If you do not file your return by the due date, you may have to pay a failure-to-file penalty."
Additionally, if you pay as much as you can by April 15, you can lessen the amount of interest owed. The late payment penalty is usually one-half of one percent of any tax (other than estimated tax) not paid by the regular due date. It is charged for each month or part of a month the tax is unpaid. The maximum penalty is 25 percent.
There are three choices for filing Form 4868 (PDF), Application For Automatic Extension of Time To File U.S. Individual Tax Return; 1) electronically (such as by computer), 2) by paying part of your tax due with a credit card through an outside service provider listed on the form, or 3) by mail. If you file your Form 4868 electronically you will receive an acknowledgement or confirmation number for your records and you do not need to mail in Form 4868. If you need to pay additional taxes, you may do so through the outside service provider or through e-file.
Here are some areas where IRS can help:
Added Flexibility for Missed Payments: The IRS is allowing more flexibility for individuals with existing Installment Agreements who have difficulty making payments because of a job loss or other financial hardship. Depending on the situation, the IRS may allow a skipped payment or a reduced monthly payment amount. Taxpayers in this situation should contact the IRS.
Additional Review for Offers in Compromise on Home Values: An Offer in Compromise (OIC), an agreement between a taxpayer and the IRS that settles the taxpayer’s tax debt for less than full amount owed, may be a viable option for taxpayers experiencing economic difficulties. However, the equity taxpayers have in real property can be a barrier to an OIC being accepted. With the uncertainty in the housing market, the IRS recognizes that the real-estate valuations used to assess ability to pay are not necessarily accurate. So in instances where the accuracy of local real-estate valuations is in question or other unusual hardships exist, the IRS is creating a new, second review of the information to determine if accepting an offer is appropriate.
Prevention of Offer in Compromise Defaults: Taxpayers who are unable to meet the periodic payment terms of an accepted OIC will be able to contact the IRS office handling the offer for available options to help them avoid default.
Postponement of Collection Actions: IRS employees will have greater authority to suspend collection actions in hardship cases where taxpayers are unable to pay. If an individual has recently encountered a job loss or other financial problem, IRS assistors may be able to suspend collection in some situations without documentation to minimize burden on the taxpayer.
Expedited Levy Releases: The IRS will speed the delivery of levy releases by easing requirements on taxpayers who request expedited levy releases for hardship reasons. Taxpayers seeking expedited releases of levies to an employer or bank should contact the IRS number shown on the notice of levy to discuss available options. When calling, taxpayers requesting a levy release due to hardship should be prepared to provide the IRS with the fax number of the bank or employer processing the levy.
If you are behind on tax payments there could be additional help available if you are facing an unusual hardship situation. For assistance with your back taxes contact the phone numbers listed on your IRS correspondence.
More information is available on the IRS Web site at IRS.gov or by calling 1-800-TAX-1040.