If you have been assessed a tax bill that you cannot pay, know you will not be able to pay your taxes when due, or have unpaid income taxes due to the IRS or state it is important to understand how the IRS works so you can avoid any unnecessary penalties and interest and most importantly to understand what options are out there. Everyone’s situation is different and there is not one solution for everyone in these types of cases.
Whether you have been assessed with a tax liability or you have an upcoming tax payment that is due and you know you won’t be able to pay it is important to understand the various options you have. The IRS realizes that this is a common problem and they have tried to create solutions that can meet the needs of every taxpayer in any situation. It is important to use the method that works best for your unique financial and personal situation.
The deadline for paying individual taxes is April 15th. Understand how unpaid or underpaid taxes are treated by the IRS and what types of penalties and interest you can expect to incur. If no actions are taken to resolve the unpaid tax amount know what actions the IRS is likely to take and what you can expect through each step of the collection process.
Understand how the IRS charges penalties on taxpayers that underpay their taxes or fail to pay their taxes on time. The penalty for not paying taxes or under paying taxes is between 1/4% and 1% a month. Know how much you will be charged and if you will be able to remove these penalties.
10 years is the rule of thumb for IRS collections on unpaid taxes. This rule varies by situation. Under some circumstances the statute of limitations may never expire. Understand the rules and how they apply to you.