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The tax-extension deadline is approaching on Oct. 17, and a record 19 million Americans filed for more time to administer their 2021 returns, in accordance with the IRS.
While unpaid tax balances for 2021 have racked up late payment penalties since April 18, filers with tax debt can have more options than they think, experts say.
“The IRS will not be the boogeyman,” said Sheneya Wilson, a licensed public accountant and founding father of Fola Financial in Latest York City, who urges filers not to disregard notices from the agency.
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“My biggest piece of recommendation will not be to be negligent,” said Wilson, explaining how IRS tax issues turn into tougher to resolve when filers ignore the agency’s correspondence.
“It just makes it harder to establish a payment plan,” she said.
In the event you’re wrestling with tax debt, listed here are some options to think about.
My biggest piece of recommendation will not be to be negligent.
Founding father of Fola Financial
The preferred option is to use for an installment agreement, a long-term monthly payment plan through the IRS, in accordance with Wilson.
In the event you owe $50,000 or less, including tax, penalties and interest, you possibly can arrange an installment plan online, which “takes about five minutes” but you will have to call the IRS for larger amounts, she said.
Nonetheless, the agency won’t approve the plan with other unfiled returns.
In fact, you will need to comply with a reasonable monthly payment, and you’ll have to pay future taxes on time to avoid defaulting in your agreement, the Taxpayer Advocate Service has warned.
Another choice, generally known as an offer in compromise, may will let you accept lower than you owe. Nonetheless, the IRS encourages taxpayers to explore “all other payment options” first.
In the event you can show that you’ve got undergone some form of financial hardship, it could be possible to cut back your liability through a suggestion in compromise, Wilson said.
“The IRS does will let you significantly knock down the overall amount due,” she said.
To qualify, you will need to be current on all tax returns, unless there’s a sound extension on file, and up to this point with required estimated tax payments.
There’s also a “currently not collectible” status by which the IRS may temporarily stop attempting to retrieve unpaid balances.
Nonetheless, if approved, the outstanding debt should still rack up penalties and interest, and the IRS may use your future refunds to cover the balance, in accordance with the Taxpayer Advocate. You will also have to stay current on future taxes.
It’s possible you’ll also qualify for penalty relief if you happen to weren’t capable of comply because of “circumstances beyond your control,” in accordance with the IRS.
For instance, if a first-year business by chance misses the deadline for corporate filings or its accountant gets backed up, “that could be reasonable grounds to ask for penalty abatement,” Wilson said. “Many taxpayers do not know that.”
While taxpayers may experience long hold times, the IRS may process some requests for penalty abatement by calling the number in your notice.