Late Filing: What to Do to Pay your Federal Taxes?
If you are planning on late filing, don’t “fall to the Dark Side with the IRS. This month’s article is a little tongue-in-cheek, as May 4 is also known as “Star Wars” Day. “May the Fourth be with you,” as they say.
When it comes to Star Wars, we’re all familiar with the Light Side and Dark Side. The Dark Side is the path to all kinds of trouble. In the real world — the world in which we work, live, and pay taxes — it’s possible to “fall to the Dark Side” when your tax situation gets the better of you.
Here’s what I mean: The deadline arrives, but you find you can’t file your tax return or simply don’t have the funds to pay your owed or estimated taxes. You might not know what to do or what your options are. And, you’re worried about getting behind on your taxes.
Now, if you let it go, you can quickly fall to the Dark Side. You can find yourself in a position in which you are threatened with penalties or interest by the IRS. It can be easy to fall into a cycle of owing more than you should or need to because of issues you may encounter before the deadline.
Here’s what you can do to avoid falling to the Dark Side.
If you didn’t or were unable to file your tax return (regardless of whether or not you paid any tax), start by gathering as many relevant documents as you can. This includes W-2s,1099s, and any other related forms you may have.
If you act quickly, you can prevent a failure-to-file penalty. This penalty can be up to 25% of the balance due. For most taxpayers, that can be devastating.
When it comes to paying taxes, things are a little different. If you are unable to pay your taxes in full by the usual deadline, your next best action is to pay as much as you can right away. Going into May, if you haven’t yet paid, this is still an option.
The sooner you pay, the more it can reduce the failure-to-pay penalty and any interest. Even if it’s only a partial amount of the estimated total, it can save you money. This, at minimum, gives you more control over the situation.
If you owe $10,000 or less to the IRS, you can set up a payment plan on your own. For the average taxpayer, this is a great option if you’re not in a position to pay in full. You can learn all the details of the “under $10K payment plan” here.
For taxpayers who owe $10,000 or more or are unable to pay anything to the IRS due to financial hardship, you can find guidance on how to resolve your IRS matter for FREE here.
You don’t have to stray to the Dark Side. With some planning and proactiveness, you can avoid many, if not all, of the pitfalls that come with late filing or an inability to pay taxes. By taking these steps, you can stay on the Light Side and have less to worry about!