The Internal Revenue Service is making it easier for some taxpayers who can’t pay their taxes in full to do so over time, without the fear of accruing substantial penalties and interest.
Additionally, the IRS has announced that it will give taxpayers who were out of work for a long period in 2010 a six-month grace period from penalties for failing to pay. Those who are self-employed and earned sharply less than the year before because of the woes of the national economy also can have the six-month grace period. In both instances, taxpayers must meet conditions related to things such as maximum income or maximum taxes due.
The filing date for 2010 taxes is April 17. Those who don’t have the cash to pay that day should not ignore the deadline. Taxpayers must act fast to take advantages of more options for repayment, and perhaps consulting with an attorney can ensure all avenues are explored.
For taxpayers who don’t file a request for their taxes and a request for an extension by April 17, penalties will total an additional 5 percent of taxes owed for each month the payment is outstanding, as well as interest. By filing an extension request, the penalty drops to just 0.5 percent per month.
Experts advise contacting the IRS ahead of time if taxpayers cannot make the full payment on April 17. The IRS could waive the penalty, as well, in the case of extreme circumstances, such as a natural disaster or death of an immediate family member.
Additionally, taxpayers who cannot pay in full have other options. They include:
· Paying by credit card if the interest on the credit card will be less than any penalty.
· Seeking a short-term extension if payment can be made within 120 days.
· Applying for an installment agreement, which allows for installments of up to six years.
· Seeking an Offer in Compromise to reduce the tax owed when financial hardships exist.
Source: Huffington Post, “Can’t Pay Your Taxes? Try These Tips,” Jason Alderman, March 14, 2012