Suggestions for when you cannot meet your tax obligation

| Apr 3, 2020 | Income Tax

Every year, there are Connecticut residents who struggle to pay their taxes. This year will be no different. When taxes are owed, and one lacks the funds to pay them, what can one do? This week, this column will share a few suggestions for those struggling to meet their tax obligations.

Suggestion number one: Do not panic. There are numerous options out there to help those who may struggle to pay their taxes. Those who would like more time to figure things out can file for extensions to give them a few more months to form a game plan.

Suggestion number two: File on time and pay what one can. Failing to file taxes on time can result in the Internal Revenue Service charging a failure-to-file fee. Completely ignoring one’s tax obligations can result in more serious accusations — such as tax evasion. Those who file on time and pay even just a little bit will stay in the IRS’ good graces.

Suggestion number three: Look into repayment plans or delayed collection. At the end of the day, the government just wants to collect the money it is owed. There are short- and long-term repayment plans that can help people meet their tax obligations. It may also be possible to get the IRS to agree to a delayed collection — meaning it will accept a late payment. Just know that interest and penalties accrue every month until the debt is paid in full.

Suggestion number four: Seek a compromise. If there is no way one will be able to pay the tax bill in full in a reasonable time frame, it may be possible to seek an Offer in Compromise. This is where a taxpayer and the IRS enter into an agreement to lower the tax bill. Such an agreement can be challenging to negotiate alone.

The inability to meet one’s tax obligation can add a lot of unnecessary stress to one’s life. This is a problem that can be resolved. Connecticut residents who would like assistance with negotiating with the IRS can turn to legal counsel for help.

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