Tax season is in full swing. But as many cross their fingers that they don’t get audited, and others enjoy a tax refund, there are those who wonder what happens if they can’t pay what they owe. For various reasons, many people find themselves with a tax bill that they just can’t afford. Many of them just avoid filing their tax return, since they don’t have the money anyway.
This is a bad idea.
The penalty assessed for failure to file is more than the interest you would pay on your missed tax payment. You should always file your tax return. It’s the law. (No, it’s not “voluntary“.) And things get even uglier if you don’t file.
Instead, consider using the IRS payment plan. If you owe less than $25,000, and you can’t pay, there is an online payment agreement form that you can use to apply to set up a payment plan with the IRS. While you may be denied a payment plan, chances are that you can work something out. Yes, this is actually a loan, and yes, you will have to pay interest. But the interest the IRS charges is usually significantly less than the interest you would be charged on another loan — especially if you use a credit card or pay day loan to cover the deficit.
If you can’t pay your taxes this year, contact the IRS. Explain your situation, and try to set up a payment plan. Getting the issue resolved quickly is likely to save you great expense and trouble later.