What Should I Do if I Can’t Afford to Pay My Taxes?

calculator and paper with taxes

If you can’t afford to pay your taxes it can feel overwhelming and scary. You might be spiraling thinking of the potential repercussions you might face from the IRS (Internal Revenue Service). However, try not to panic. If you can’t afford to pay there are steps you can take to resolve the issue. We understand that financial situations can be complicated and tricky. For more information and assistance regarding tax payments, a skilled Oradell, New Jersey lawyer can help.

What Are My Options if I Can’t Afford to Pay Taxes?

If your financial situation does not allow you to pay the taxes you owe in full or in a timely manner, you have a few options. You should always file a tax return even if you are unsure if you will be able to pay. If you can’t afford it, contact the IRS to explain your situation. They will evaluate your income, dependents, expenses, ability to pay, and overall financial situation. If they agree that it is impossible for you to pay the amount now they can generally offer you two options.

First, you can set up a payment plan. With a payment plan, you are able to pay your total amount owed in installments over the course of several months. This can be the perfect solution for many taxpayers if their income and expenses allow them to afford the total over time but they are unable to pay the lump sum right now.

If the IRS determines that it would be impossible or extremely difficult for you to pay the amount you owe, they may offer you an offer in compromise. If paying the full amount would create financial hardship you can offer them a lower amount that you are able to pay either in a lump sum or in installments. The IRS may approve your application depending on a number of factors. If approved, they agree to compromise and accept the lower amount to settle your tax liability.

Can I Go to Jail for Not Paying My Taxes?

If you filed a return and followed proper procedure but you simply cannot afford to pay your taxes the IRS is not likely going to throw you in jail. However, there are instances where you could face criminal charges and severe penalties for tax fraud. The following crimes could result in harsh consequences.

  • Tax evasion
    • If a person is convicted they can face fines of $100,000 and jail time of 5 years. Corporations found guilty can face fines of $500,000.
  • Helping someone commit tax evasion
    • Aiding in someone else’s tax evasion could land you in jail for 5 years depending on the circumstances
  • Failure to file a tax return
    • Failing to file a tax return will first result in fines and penalties such as increased interest. Prolonged failure could lead to jail time.
  • Filing a false tax return
    • Filing a tax return with purposeful misinformation could result in a jail sentence of three years.
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