Death is free
January 26, 2010 4:27 PM   Subscribe

It's tax time and I screwed up, what are my options?

Alright, I screwed up.

I will owe uncle Sam some monies come April, and I didn't manage my money well so I don't have enough to pay taxes.

In addition I will be unemployed in two months, so I need all the savings to survive until I find another job (I've begun looking).

So what are my options? File taxes and then pay it with penalties when I come into some money?
posted by pakoothefakoo to Law & Government (12 answers total) 1 user marked this as a favorite
 
From the IRS: "For those who cannot resolve their tax debt immediately, however, an installment agreement can be a reasonable payment option."
posted by scody at 4:31 PM on January 26, 2010 [1 favorite]


You MUST sign up for the installment agreement, or one of their other options for people who can't afford to pay. The penalties are nearly usury in their rates and they are absurdly high and may impact your credit. The installment plan does no such thing and tends to be capped around 6-7%, if you owe under $3,000. Follow the instructions on the link scody posted but do NOT just pay it as you can on your own; you MUST file for a formal installment.

Not a tax attorney nor accountant, the preceding is not tax advice, etc, etc.
posted by disillusioned at 4:43 PM on January 26, 2010


I've done the installment plan before. Don't worry. They'll be nice to you because at least you're making an attempt to pay rather than evade your taxes altogether. That doesn't mean that they'll let you off easy, but the monthly payments tend to be do-able when stretched out over several months.
posted by zerbinetta at 5:08 PM on January 26, 2010


We're on an installment plan, from a tax shock a couple of years ago. It's fine, they were nice, it's no big deal.
posted by Lyn Never at 5:30 PM on January 26, 2010


I'll look into the installment option, thanks!
posted by pakoothefakoo at 5:33 PM on January 26, 2010


First things first:

FILE ON TIME.

Let me say this again:

FILE ON TIME.

When you file, pay as much as you can afford to pay towards your obligation.

When the IRS processes your return, they will send you a note in the mail informing you of your underpayment, and will supply you with a number to call. It's at that point that you will negotiate your installment agreement.

If you can, whenever possible, pay more than your monthly installment - debt sucks, and IRS debt just feels worse for some reason. At least they're generally easy to deal with if you play by the rules.

Good luck!
posted by swngnmonk at 6:06 PM on January 26, 2010 [2 favorites]


I just did my taxes this evening, and discovered that I owe more than $1,000 to the IRS. This was a surprise. I think that there may be broad implications.

It looks like tax withholding rates were reduced last April, in order to give us more cash to spend. The amount of the reduction seems to be significantly greater than the Making Work Pay tax credit ($400 single or $800 joint) that is on the tax form. (Did you see that credit when you did your taxes?) If there are many people who discover that they owe a chunk of cash to the IRS this spring, the economy might suffer for it.

I would be interested to see if others have discovered that they owe more than they thought they would.
posted by Midnight Skulker at 7:24 PM on January 26, 2010


If it turns out that you'll have the money in October, you could try filing for an extension.
posted by crinklebat at 8:14 PM on January 26, 2010


If it turns out that you'll have the money in October, you could try filing for an extension.

I believe you still have to pay your estimated tax in April; the extension just means you don't have to file all the paperwork till October.
posted by scody at 8:18 PM on January 26, 2010


You can definitely file a 4868 extension-to-file form without including payment. That's fairly routine. The IRS is ok with this, and the extension is granted automatically ... but they'll charge you some interest (about 1% per month, I believe) on the unpaid amount for the April to October time period. That's why it's best to pay as much as you can with your 1040 in April.
posted by dacoit at 10:04 PM on January 26, 2010


Oops, with your 4868 form in April I mean.
posted by dacoit at 10:05 PM on January 26, 2010


DO NOT do what crinklebat says. If you file an extension, you still have to pay up by April 15, even if you don't have the return done by then. If you do the return by October, and you haven't paid what it says you owe, then you will have to pay a penalty, and it's financially about as bad as if you hadn't filed at all.
posted by Citrus at 8:52 AM on January 27, 2010


« Older Help a first time international traveler have a...   |   Red Licorice Recipe? Newer »
This thread is closed to new comments.