3 Mistakes To Avoid When You Owe Taxes
When owing taxes to the IRS, whether simply a portion of your month-to-month revenue or a much bigger amount, paying what you owe needs to be done as soon as possible. Having debt is definitely not a good way to begin the year!
However, an unpaid tax bill should not be a cause for panic. Many working Americans, in some way or another, are facing the same thing – unpaid taxes! Avoid falling into more debt by knowing which things you should and shouldn’t be doing.
Mistake #1: Paying Debt with Debt
Choosing to pay off debt with another source of debt can do much more harm than good. Looking at it in the long run, especially if the payment terms could take more than a year, you could certainly end up paying more than what you initially owed .
A bank loan would certainly be a more favorable option. Through a loan you can pay your tax debt in full with more agreeable repayment terms.
Spend some time to think about it. Compare the interest rates, fees ,and repayment terms so will know the total of how much you’ll be paying back while you settle your tax obligation.
Mistake #2: Failing to File a Return and Extension
Even if you can’t afford to settle your debt in one go, filing for a tax return is still required. IRS will charge 5% failure-to-file penalty for every month you owe, with a 25% maximum penalty. And don’t forget the interest that will continue to accrue until it’s fully paid off.
If you are unable to file iyour returns before the April 15th deadline, filling an extension will give you an additional six months without a failure-to-file penalty.
Mistake #3: No Payment Plan
Given that there are many Americans who can’t pay what they owe in full, the IRS offers payment plans. Find out if you are qualified to apply. So if you feel you will be unable to stroke a check for the full amount, proactively work it out with them.
For debts less than $50,000 (income taxes, penalties, and interest), as of 2015, an online payment plan is available. If you meet the requirements, take advantage of their online payment, otherwise, you’ll need to mail in your Form 9465 and wait for a reply to find out which installment plan you qualify for.
Every eligible tax payer has 72 months to settle the full amount, however, interests and penalties will accrue for as long as you owe them money.
Underestimating The Consequences
The last thing you would want to do is ignore the consequences of not paying what you owe, or not communicating with them. If there’s no action on your part, the IRS has the legal ability to place a lien on your property or business if the debt remains unpaid.
Sell An Unwanted House Before Your Tax Bill Gets Out Of Control
Having a lien on your house will impact its value and might cause other concerns, especially if you are considering selling the house in the future.
Selling an unwanted house to help finance tax and debt payments is one of the leading reasons that we buy houses from homeowners here in San Antonio.
Having quick access to cash from a burdensome home is a great solution for those with few options.
This alternative real estate solution is available to homeowners all across the USA. If you or someone you know in Texas is asking, “What is the best way to sell my house in Dallas?” or are looking for a ‘We buy houses in Houston‘ company, we have some partners that we highly recommend.
There are many ways to settle the taxes that you owe, even if you’re financially short at the moment. Check out this helpful post to find out which option will help you best.