Did you know that more than 176 million people in the United States of America paid taxes in the year 2020? One of the big things that linger on the minds of many people each year when tax season rolls around is, “What happens if you can’t pay your taxes?”
Most people feel that there is only one option, and that is to pay your taxes in any way that is possible. But what if you find that you don’t have the necessary funds when it comes time for tax payment to the IRS? Tax filing is stressful enough without the fear of the unknown.
The good news is that you’ve come to the perfect place to gain the answers that you’re seeking when you can’t pay your taxes. Keep reading this article to learn everything you need to know from this guide to pay your taxes.
What Happens If You Can’t Pay Your Taxes?
If tax season rolls around and you find that you don’t have the money or cash to pay your taxes, the last thing that you should do is avoid tax filing and tax payment. If you choose to not pay your taxes then the government gains the right to seize your assets from you. This could mean that you lose your vehicle or, even worse, your home.
The worst-case scenario is that you’ll face time in jail due to failure to pay your taxes. There are multiple scenarios that you could face that will lead to paying penalties on your taxes when you start to file them so it is a good idea to know what to expect ahead of time.
You can always apply for an extension on filing your taxes if you think that you can gain enough money by the new due date to pay your taxes for the previous year. If you choose to take this route then you need to file for your extension by the date that taxes are due.
Taking this step doesn’t absolve you of your requirement to pay the taxes that you owe, as you’re still required to submit the money that is owed to the IRS by the required deadline. If you’re afraid that you won’t have the money to pay what you owe on taxes then you can always look into the IRS’s fresh start program at https://silvertaxgroup.com/irs-fresh-start-program/.
Routes to Consider for Paying Your Taxes
If you don’t have the cash on hand to pay your taxes, there are still some other routes that you can consider taking to make sure that the IRS doesn’t seize your assets. Knowing your options is the most empowering thing that you can do and it could save you a ton of money and consequences in the long run. Here is a closer look at some of your other options.
One of the most common approaches to paying your taxes if you’re short on money is to borrow money through your credit cards or through a bank loan for debt consolidation. Keep in mind that this isn’t a perfect remedy. You won’t owe the government any money at this point but you’ll change that debt to owing the bank or credit union that you chose to go through.
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Before you move forward with this step you’ll want to do your research and ensure that the loan that you take out comes with a low or manageable interest rate. If you take out a loan with a high interest rate in order to cover what you owe on your taxes then you’ll find yourself in a worse predicament in the long run.
Request a Payment Extension
Another effective option that you have at your disposal is requesting an extension on your tax payments. Even if you don’t have the money to make your tax payments, you’ll put yourself in a much better position if you file your taxes on time. The difference is that your penalty interest rate will be at 0.5 percent rather than 5 percent per month.
If you’re facing a ton of difficult hardships that are keeping you from having the ability to pay your taxes then you can make good use of Form 1127. This form is the form that you’ll use to request a payment extension on paying your taxes and it gives you an extra six months to come up with the money.
If you take this approach then you’ll need to list all of your assets and your liabilities as well as a statement with itemization showing the money that you’ve received and spent over a period of the previous three months. Keep in mind that it isn’t often that the IRS allows you these extensions so you’ll need to have a really strong case.
Seek an Installment Agreement
If you’re worried that you won’t make the money that you need in order to pay your taxes during the extension period then there is another option to know about. Form 9465 is a form that is meant for the application process of an installment agreement for tax payments.
Getting an installment agreement is perfect for protecting yourself and your assets from the IRS enforcing the collection of these assets. Keep in mind that you’ll still need to pay your penalties as well as your interest. Still, the monthly payments that you agree to make to the IRS will let you know that you’re set on paying them the money that is owed.
Use Your Savings
No one likes to use their savings to pay for things, but paying your taxes is one of those moments when having emergency money comes in handy. Think of your saving as taking out a loan from yourself that doesn’t require interest. This is an effective way to pay your taxes without making life more difficult.
Now You’re Aware of What Happens if You Can’t Pay Your Taxes
Tax season is one of the most stressful times each year for countless families because of the worry of what happens if you can’t pay your taxes. If you find that you’re going to struggle to pay your taxes it isn’t the end of the world and there are still good options out there. Consider dipping into your savings or borrowing money through a bank or credit union.
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