Tax filing deadline is coming-what to do if you can’t pay what you owe on April 18
Many people make the mistake of not filing when they think they cannot pay what they owe the IRS. There are many reasons to file anyway, not the least of which is—it’s the law! The penalties for fraud and tax evasion are much worse of course. Those apply to people who willfully refuse to comply with their legal obligations.
The failure to file penalty is much worse than the failure to pay penalty. Failure to file is 5% of the unpaid balance per month vs. 0.5% per month for failure to pay. If the taxpayer is due a refund there is no failure to file penalty.
Another solution is to file an extension and send as much as possible along with it. That protects you from the failure to file penalty.
Finally, another advantage to filing is that it starts the statute of limitations on collection running.
Taxpayers who cannot pay what they owe should file the return by the due date. It is recommended to seek advice from a tax professional in order to get a full picture of the options available. Some possibilities are penalty abatement, installment agreement or an Offer in Compromise, if qualified. The IRS will rarely offer all the options to a taxpayer, especially the Offer in Compromise. When it comes to settling your tax obligations with the IRS, don’t go it alone!