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Here's what to do if you can't pay your income taxes

• JFoster

  2018-04-04 05:45:44 PM

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  JFoster

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  I'm hoping this isn't me this year, but it's at least good to prepare for such a thing. Life happens, and no judgement is made on anyone with such a problem. When it comes to owing Uncle Sam, we're all in this together. So what do you do if you can't pay your income taxes? I found an article on just the matter. The first thing it says, which sounds pretty obvious is to make sure you file your return on time. The IRS charges a penalty of 5% if it's late. Don't forget that you can set up a payment plan with the IRS. You can also file for an extension by the deadline date.

  The best is to pay as much as you can by the April deadline to minimize penalties and interest.
  If you can pay the full bill within 120 days, you will still pay penalties and interest on the balance, but there is no IRS fee to set up the plan.
  
  An installment plan is more expensive. You'll pay to set it up, and it costs more in interest and penalties depending on the length of the payment term, six year maximum on that.

  Does anyone else have advice for those out there who might struggle with paying their income taxes?
• J.K.Logic

  2018-04-14 04:07:39 PM

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  J.K.Logic

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  Been in that boat before. It sucks but once you bite the bullet and actually call the IRS and work out a payment plan, it's not that bad. They do charge you a fee, I believe it is like $50, to set up the installment plan. Also you don't have to pay that fee upfront; it gets tacked onto your existing debt.

  From there, they do the math based off your income ability to pay back the debt vs the 6 years max to pay it back. And you can either pay the minimum over those years or pay more and get it over with quicker.

  They do charge interest, though it's far lower than say a credit card. Don't quote me on this, but it's in the neighborhood of 4-7%. Think it depends on the year. Either way, I would ask that question and anything else you can think of when you call in to set up the installment.

  After that, you make payments through an online portal. EFTPS is the most common option, and the one they will recommend. I would recommend registering an account on there as soon as you can (if you know you will be going for a payment plan) as it takes several business days to get your PIN for the site.

  Also, if anyone needs help using that site (it's not the most user friendly) let me know here. Happy to help. Can be a little tricky the first time around.