Finances Got You By The Throat? Here’s How You Can Reduce Your Tax Payments This Year
Tax day is due July 15th and not everyone is looking forward to it. In 2019, approximately 8 million people did not pay their taxes. On top of that, the stress as a result of the COVID-19 pandemic is putting the economic system into uncertainty- so much so, that in 2020, 37% of taxpayers said that they do not have the resources to pay this year’s taxes.
However, to aid taxpayers, the federal government did give an extra 90 days to close the payments this year since the original date was April 15th. But, what if you are still unable to pay them? Is there any hope for you?
We’re here to offer some guidance. The first thing to do is not panic. Instead, try to understand that many people from all walks of life face this situation in their lifetime. For those currently in the fold, there are various options available to help taxpayers out:
1. Monthly Installment plan
If you are behind payments but not by a considerable amount, opting for an installment plan might be your smartest move. What you need to do is file your return, log in to irs.gov and fill out the online payment agreement application.
For monthly installments, you can download Form 9465, which will give you 72 months to complete the payment. However, this is for payments equal to or less than $50,000, including interest, tax, and penalties.
Moreover, you need to be eligible for the program with previous tax returns filed first. Lastly, business owners and self-employed people with quarterly payments would have to make payments in the current year so they meet their deadlines.
2. Request an Offer to Clear Payments
This is option two for taxpayers who simply do not have the resources to pay back what they owe. It is really a gamble in which you make an offer to the IRS, and if it’s accepted, that’s the total you have to pay. In layman terms, it’s the IRS asking you how much you have on you and making a compromise. As a result, you don’t have to pay the full amount. However, some different terms and conditions need to be met for payments to be accepted.
For instance, the IRS will check your income, expenses, asset equity, and ability to pay to determine whether you’re really going all-in with the offer made. If yes, then they will most likely approve it. There are some risks involved in doing this. First, you have to pay 20% upfront and the rest in installments. If you fail to pay the installments, chances are the IRS might sue you for the original amount along with interest and penalties.
3. Partial Payments and Complete Paperwork
The most important thing you must do is to file your tax returns regardless of whether or not you have the payments. Filing could save you from a lot of trouble in the future. Secondly, if you are unable to pay in full, try to pay a small amount at least every month. What this does is at least prove your intent to pay even if it’s not in full. Plus, you get to save yourself from punishing penalties. Failure to file is worse than not paying the taxes.
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