Resolving IRS Tax Debt - Why You Should File Your Tax Return Even If You Can’t Pay
While some of the biggest and most profitable corporations, including General Motors, are getting away with paying no taxes for 2015, the average person without the cash to pay them is fearful. What to do?
Many Americans owe taxes to the Internal Revenue Service (IRS), but simply don’t have the money to pay them. While it's tempting to avoid filing your tax returns to delay the IRS knowing that you have a balance due, that is actually the more costly and problematic method of dealing with the problem. Even filing for an extension is not a solution when you do not have the money to pay your tax debt.
Filing for an extension is an extension to file; it is not an extension to pay. Filing your returns on time ensures that you avoid the failure to file penalty, and helps you get your tax debt resolved in a smoother and timelier fashion, also reducing your interest and late payment penalties.
One important thing to note is that if you ignore letters and notices from the IRS regarding paying your tax, they will eventually garnish your wages, levy your bank accounts, puts liens on your assets, and put negative information on your credit report.
IRS wage garnishment is a serious issue because they are allowed to garnish most of your wages. The amount of wages that are exempt from garnishment is the amount of the personal exemption (currently $3650 per person in your household) divided by the number of pay periods you have per year.
You should realize, however, that speaking with the IRS without proper representation can be very tricky. The IRS has plenty of fine print. You also have to make certain that for future years, you have sufficient withholding or estimated payments, to ensure that you will not have a balance due in the future.
The IRS is also not quick to offer up other resolutions that may best resolve your situation. Though daunting, ask for help, decide to confront “the beast” that is taxes, and prevent further stress in the future.
Our advice is to contact a professional and plan on filing. Ultimately, you will be avoiding the worst consequences, getting sound advice and staying on the best path for your tax health.