The deadline for filing federal taxes has passed, and any San Jose tax lawyer would say that most people who can’t pay their tax bills should immediately explore any options available. Fortunately, there are things you can do if you are concerned that you didn’t cover your balance by the 18th of April.
The Biggest Tax Mistake You Can Make
Even if you’ve requested an extension, penalties and interest will rack up if you don’t pay the amount of taxes you owe by the normal due date. According to a tax attorney in San Jose, the biggest mistake you can make is skipping the filing deadline. Although there are many reasons this course of action earns the top spot on the list of mistakes, one of the biggest is the additional money you will owe in terms of penalties and late fees. For example, the failure to file penalty is 5% of your unpaid balance every month, while the late payment penalty, in contrast, is 0.5 percent. Both are applied on a monthly basis and limited to 25%, including interest.
Ignoring IRS Tax Notices
Also high on the list is ignoring correspondence from the IRS. If you have an unpaid balance and you’ve received a letter from the Agency about it, you should immediately respond by contacting someone at the IRS. Whether it’s an older tax debt or the first time you’ve owed a balance you can’t pay, there are several options you should consider:
Asking the IRS for a Payment Plan
An IRS tax attorney can confirm that one of the most popular options for those in tax trouble is asking for an installment agreement. Ultimately, most agents do not have a goal of putting people in jail or leaving taxpayers without the means to pay for living expenses; they simply want the bill to be paid. New IRS installment plan procedures are more streamlined and less intrusive than in the past.
Change of Status to “Currently Not Collectible”
It may also be possible to change the status of your tax bill to “currently not collectible.” This essentially means that the IRS will temporarily cease from attempting to recoup any unpaid balance you owe. A back taxes attorney is the best individual to speak to about this option, and to see if you qualify. If the status is approved, interest and penalties may still apply, and future refunds may be taken to cover back taxes.
Offer in Compromise
An offer-in-compromise is another option for which you may qualify, and this allows you to settle your outstanding bill for a lesser amount than what is actually owed. However, IRS agents always recommend that taxpayers only use this option as a last resort. It is typically reserved for those who can prove they’ve experienced financial hardship that is unlikely to go away in the foreseeable future. If you qualify for this, the IRS may agree to significantly lower the total amount due. You will need to comply with all future filing and payment deadlines.
If you find one of these options appealing, it is still best to seek the advice of a San Jose tax lawyer when facing any problems with the IRS.