If You Don't Have Money to Pay Your Taxes, You Have Legitimate Options
If you don't have money to pay what you owe the IRS, you have a few options to work with. Whatever you do, don’t ignore the letters from the IRS and don’t let your back tax problem go unattended. The IRS has a great deal of power when it comes to recovering money they think is theirs.
When you owe the IRS money, they can garnish your wages, levy your bank accounts, put a lien on your home and seize other assets.
Here's what you can do if you find yourself not being able to pay your taxes. Note, we always recommend getting in touch with a specialized tax resolution professional to help avoid the harsh penalties and interest that accrued on your back taxes. It’s far easier to navigate towards tax resolution, if you have a professional working with you. If you’d like to schedule a no-cost confidential tax relief consultation, contact us here.
First, make sure that you file your returns
Even if you have no hope of being able to pay your taxes, you should at least file your income tax returns. Whatever the penalties are for not paying your taxes, the penalties for not filing are much larger. The IRS will remove penalties for not filing and not paying but you have to have a good reason. We can request to have your penalties removed or reduced. It's also important to remember that when you file for an extension, it only gives you more time to file. Your payment date remains unchanged.
Revisit your W-4 withholdings
If your employer withholds money from your salary to pay your taxes with, you shouldn't have to worry about paying anything extra from that income source. If you do owe more, it's a sign that you withholding exemptions are incorrectly reported on your W-4 form. To make sure that you don't get into tax trouble repeatedly, you should make sure your W-4 form is correct and get advice from a tax professional about the kind of withholdings necessary exemptions.
Make a partial payment
If you can't afford to pay all that you owe, you should pay whatever you can. While you will still be hit with interest and penalty charges, they will be smaller than they would be if you paid nothing. These charges are proportional to what you owe the IRS.
Try to work with the IRS
If you can't pay, there are resolution options available to you if you qualify for them. They include a payment plan or an offer in compromise to name a few. You need to first step up and admit to your inability to pay, though.
When the IRS grants you a payment plan, you get to pay your back taxes in installments each month. Applying for a payment plan is easy if you owe less than $10,000 - you simply need to fill out the form online. It can be more difficult to get the IRS to accept a monthly payment plan if you owe $10,000 to $50,000. If you owe more than $50,000, you need to complete IRS form 433-A. Generally once you hit the $50,000 threshold it’s advisable that you hire the services of a competent experienced tax professional. If your repayment plan is approved, they can give you up to 72 months to finish paying. You need to pay interest and processing fees for the plan, though.
If your financial hardship is serious enough to preclude the possibility of repayment in the future, the IRS has a program called the Offer in Compromise. You need to prove to the IRS that you will never be able to pay the full amount back even over time.
Contact us if you’d like assistance in resolving your tax problem. Schedule a free confidential consultation here.
Be sure to not fall for false promises
Scammy so called tax professionals and other con artists know how desperate things can get for people who are unable to afford their taxes. They sometimes advertise on television and radio, promising to negotiate with the IRS to bring your taxes down in return for a large fee without first seeing what IRS programs you are eligible for. You should be very careful before engaging these types of companies. Going to a local, experienced tax resolution professional may be in your best interest.
If you need an expert tax resolution provider who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.
Tax Tips for the Self-Employed: A Freelancer’s Guide to Paying Taxes
If you are an employee, you get a paycheck every pay period and most likely pay little attention to your taxes until the end of the year. Your employer does a lot of the work for you and you get a W2 at the end of the year.. However, if you are a freelancer or are self-employed, the responsibility of paying your taxes rests solely upon your shoulders.
There are 14+ million American taxpayers currently in the IRS collection division, and it’s easier to land there if you’re self-employed and don’t fully know what to do when it comes to taxes. Below are some simple tips to help you 1) reduce your tax liability and 2) keep you out of tax trouble.
Make sure to check with your tax professional to discuss your unique situation. If you’re already tax trouble, you’re not alone but you must take action before the IRS levies your bank account or seizes any property you have. Contact us for a free, no-obligation consultation and let our tax resolution team get you out of tax trouble.
With that said, let’s jump into the tax tips for freelancers and the self-employed.
1. Report business-related expenses and keep clean records.
If you purchased a new laptop to help you with your business, you can report that as a tax deduction. If you’re using your cellphone primarily for communicating with business clients, you can claim that as a tax deduction as well. If you are able to prove with documents that your write-offs are legitimate, you can include them on your tax return. Make sure to keep strict and detailed records of any deductions in case the IRS wants proof later on.
2. Differentiate between your business and personal expenses.
The IRS considers most business-related expenses as legitimate write-offs but if you go beyond a certain limit, you can be subjected to an audit. For example, you can include office furniture or office supplies in your tax deductions for your home office, but you definitely may not claim that new sofa set in your second living room as a deduction.
3. Make Estimated Tax Payments.
As an employee, you get taxes taken from your paycheck every time. If you’re self employed, you don’t. This can lead to a large tax bill at the end of the year that you’re unable to pay. Self-employed taxpayers generally need to make quarterly estimated tax payments. IRS Publication 505, Tax Withholding and Estimated Tax, has details on making those payments.
4. Time large purchases toward year’s end.
If you have been planning to get a new printer or a new ergonomic chair for your home office, do so in the last quarter. This way, you can include the purchase as a tax deduction for the year. The bigger the purchase, the bigger the tax deduction.
5. Monitor and track your use of your car, phone, and other utilities.
It is often highly impractical to get a separate car, Internet subscription, electricity, or even a phone for your home-based business. What you should do instead is to keep track of how much you use these items for business-related purposes. How many minutes are spent on business calls? How much mileage do you drive for business trips? Keep a list of these usages and include them in your list of tax deductions.
6. Have a qualified tax professional on your side
There are a lot of variables when it comes to taxes. As a small business owner, having someone to turn to when you have questions is absolutely essential. You should focus on growing your business and doing what you love.
If you’re already in tax trouble and you need an expert tax resolution provider who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.
What Can the IRS Do to Collect Back Taxes?
Opening the mailbox and finding a letter from the IRS is frightening, but what happens next can be even scarier. The tax agency wields incredible power, and if they claim you owe additional taxes they have many different options for forcing you to pay.
When the IRS claims you owe additional money, they will act quickly, and that could leave you reeling, and trying hard to preserve the money you need to pay your bills, feed your family and keep a roof over your head. If you are employed, the IRS can reach into your paycheck, forcing the company you work for to withhold part of what you are owed until the tax debt has been satisfied.
The IRS can also hold onto any refunds and government payments you would otherwise be due. If you have been waiting for that big fat refund check to arrive, you could be waiting a long time if you owe money to the IRS.
As if all this were not frightening enough, the tax agency also has the power to levy your bank accounts, including the accounts you need to run your business and your life. Those bank account freezes could leave you without the cash you need, putting you in a real bind and forcing you to pay back what you owe.
Your home could even be at risk if you owe money to the IRS. The tax agency could, for instance, apply for a lien against not only your primary residence but any other real estate you own. The threat of this kind of action has compelled many taxpayers to cough up the money the agency says they owe, even if they think the IRS is wrong.
As you can see, the IRS has wide latitude and plenty of power, and the tax agency is often unwilling to settle for less than the government says you owe. If you disagree with the amount the IRS is asking for, or if you simply do not have the money to pay the bill, you need to act fast. Ignoring the problem will only make it worse, and you cannot simply pretend that you never pulled that fateful envelope out of your home mailbox.
If you are on the wrong end of a compliance action by the IRS, you cannot afford to leave anything to chance, and you certainly should not try to fight back on your own. The tax code is complex, and far more pages than the Bible, and like that holy book, many of the terms are arcane and difficult to understand.
When fighting the IRS, you need the help of a professional, and that is where a tax resolution export comes into play. By working with a professional you can fight back on an even playing ground, and the money you save could be worth far more than the fee you pay.
Our firm specializes in tax resolution and helping people who owe the IRS or state $10,000 or more. We’ve seen taxpayers get blindsided every year by a huge tax bill and often falling behind on their taxes for years on end. If that’s you, we can help. Contact our firm today to discuss your tax debt settlement options.