Whether you are an individual or a small business, filing your tax return on time is important. However, if you can't pay the full amount of income tax you owe on or before the due date, you will face interest and penalties even if you filed on time. If you have filed your tax return and you aren't able to pay your bill, consider the following options.
- Use credit or a loan to pay your bill.
In some cases, the interest you pay on a loan or credit card may be less expensive than the penalties associated with delinquent tax bills. If possible, consider using one of these resources to cover the income taxes you owe.
- Pay as much as you can.
If paying your entire tax bill is impossible even with a credit card or loan, pay as much of the bill as you can. Doing so will reduce the amount of penalties and interest you owe to the IRS.
- Work out an installment agreement.
Depending on your situation, you may qualify for an installment agreement with the IRS. Setting up such an agreement will allow you to pay your tax debt over time, thus reducing the financial burden. Having a payment agreement in place also prevents the IRS from taking aggressive collection action. Keep in mind that you can apply for an installment agreement before you receive a tax bill. Apply as soon as you can in order to limit and/or eliminate penalties and interest.
- Contact the IRS.
If you need a federal extension, you may need an extension on the deadline for your state income taxes as well. In many cases, your federal extension request can be used to extend the deadline for your state taxes as well. However, this may not be possible if you owe state taxes or if your state's laws differ.
- Get professional help.
PADGETT BUSINESS SERVICES® understands all of the options available to individual taxpayers and small businesses that can't afford to pay their taxes. Depending on the situation, we may be able to have your interest and penalties waived, help you negotiate an affordable payment plan or help you take advantage of other debt relief options available from the IRS. Contact us today to discuss your situation in detail.
Do you have the support you need to manage your small business bookkeeping?
Schedule a 30-minute appointment to speak with a local small business adviser.