Cash For Debt

Well, you all know what day it is, so here’s the obligatory tax related post from Debt Free. What if you’re one of those “pulling the cart” as it were, and you don’t have quite enough to pay your taxes this year? If you owe taxes what should you do?
Don’t worry. Just ignore it and it’ll go away. Really, just keep quiet, and watch American Idol tonight like you do every Tuesday. There’s no need to run to the post office before midnight like all those other suckers. It’s an effective strategy used by thousands of American taxpayers every year. The problem for these folks is that it’s only effective for so long. The IRS wants their (our) tax revenue, and if you owe some and haven’t paid it, they’ll eventually come knocking at your door for their cut.

So, that begs the question; “What if I owe the IRS and can’t afford to pay?” The number one thing you shouldn’t do is ignore the problem. Much like cancer or syphilis, ignoring unpaid taxes will only get you in big trouble. Just ask Al Capone, he ignored both his taxes and syphilis, and look where it got him!

If you genuinely can’t afford to pay the entire amount you owe you must contact the IRS. Ignoring them means two things: 1 – You won’t get your economic stimulus check this year, and 2, You’ll begin to accrue penalties and interest at a frightening rate. Yes, you’ll accrue penalties and interest on unpaid taxes even if you do file your return, but at much lower rate. The penalty rate for failure to file is 5% a month of the unpaid balance, up to a maximum of 25%. That’s in addition to the interest of 1.5% per month (compounded, and you know the power of compounding. If you don’t, just ask Wesley Snipes). Hey, the IRS takes VISA. This is one instance where using a credit card may actually be the more responsible thing to do. The penalty for failure to pay is 10 times lower; 1/2 of 1 percent per month. You do the math on this one.

The IRS wants your money, but they will work out things out for taxpayers who genuinely can’t afford to pay. If you have a legitimate excuse, they will be happy to set up a tax payment installment plan, for a small fee, of course! Actually that fee is a one time $105, not a trivial amount, but better than the alternative. You can lower the installment set up fee to $52 by agreeing to have the funds debited from you checking account. To find out more about IRS installment plans and other tax payment options, just check IRS tax topic 202 here.

Categories Taxes