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5 Steps to Take If You Can't Pay Your Taxes by April 15

businessman opening wallet, dumping contents into uncle sam's outstretched hand below
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By    |   Friday, 12 April 2019 11:51 AM

As the April 15 filing deadline fast approaches, there are millions of people faced with the reality that they cannot pay the taxes they owe.

Every year, about 3.5 million people can’t pay because of circumstance beyond their control. Perhaps they faced a long period of unemployment or a catastrophic illness or injury; or perhaps even a failed business or marriage.

If you’re facing that reality, the steps you take now will determine whether you keep your situation under control, or you risk becoming a target of IRS enforcement action.

Before You File Your Taxes, You Must Read This

Here are five strategies you need to know that will help you right now if you’re facing this problem.

  1. If you can’t pay by April 15, file your return anyway. If you don’t file, the IRS hits you with the penalty for failure to file. That penalty can add up to 25% to your unpaid tax bill—plus interest. This adds insult to injury in a big way. By not filing the return, you could turn a difficult situation into an impossible one.
  2. Most people are aware that they can get an extension of time to file their returns. It’s available by filing IRS Form 4868. This form automatically gets you six additional months — to October 15 — in which to file. However, Form 4868 does not give you more time to pay. Even if you’re on a filing extension, you must still pay the taxes by April 15. Of course, that is the problem. So the filing extension will not help you if you cannot pay.
  3. One of the IRS’s best kept secrets is the fact you can get an extension of time to pay your taxes. The IRS never talks about this, and in fact, historically the agency has denied that the right even exists. But it has an official form for the process. IRS Form 1127 is titled "Application for Extension of Time to Pay the Tax." File the form on or before April 15 to have the request considered. Note that the extension is not automatic. To get it approved, you must show that there were unforeseen circumstances beyond your control that prevent you from paying on time. If approved, you get up to six additional months to pay, without penalties. Interest still applies, however,
  4. If six months are not enough time, or if for some reason the IRS denies your application for an extension of time to pay, go to Plan B. Plan B is to seek an installment agreement. Use IRS Form 9465, "Installment Agreement Request." You can file this form either with your return or subsequent to filing the return. You can use this form for current (2018) taxes or delinquent taxes from other years. This form sets the wheels in motion to set up a payment plan. If you owe less than $50,000, the process is relatively simple. Consult chapter 5 of my book “How to Get Tax Amnesty” for all the details on how to negotiate a reasonable installment agreement with the IRS. One important benefit of getting an installment plan set up is that the IRS cannot levy or seize any income or assets while the agreement is in place.
  5. Whatever you do, avoid the urge to hide from the problem. Be proactive about seeking a solution. If you don’t, you’ll face potential wage and bank levies, tax liens and perhaps even property seizures. And, it may take years to get your life back to normal.

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Dan Pilla is a tax litigation specialist with more than 40 years of experience helping people solve their IRS problems. He’s written 15 books, dozens of research reports and more than 1,100 articles on taxpayers’ rights issues, tax policy and administration, and IRS problems resolution. For more information, see: www.danpillabooks.com, and www.taxhelponline.com

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As the April 15 filing deadline fast approaches, there are millions of people faced with the reality that they cannot pay the taxes they owe.
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Friday, 12 April 2019 11:51 AM
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