What Are Your Options if You Can’t Pay Your Tax Bill?

What are your options if you can’t afford to pay your tax bill? This is a question that many Maryland taxpayers are forced to ask each year. Depending on your circumstances, you may have several options available, all of which involve paying at least some of your tax liability to the Internal Revenue Service (IRS). Maryland tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, explains:

U.S. Taxpayers Cannot Avoid Their Obligations to the IRS

One thing is for sure: If you ignore your tax debt, it is not simply going to go away. Tax debts accrue interest and penalties, and the IRS will pursue collection sooner or later. Whether you file your returns without submitting payment or you fail to file (which also carries penalties), the IRS will notice, and it will take action in due course.

So, what can (and should) you do if you can’t pay?

The IRS recently published a list of options for taxpayers who can’t pay their tax bill by April 18, 2022. These options include:

Set Up an Online Payment Plan or Installment Plan

The IRS allows taxpayers to set up payment plans to meet their tax obligations over time. Taxpayers must still pay interest and penalties, but setting up a plan lets the IRS know that you are planning to pay and not attempting to evade your federal income tax obligations.

Many taxpayers will qualify for online payment plans. According to the IRS, “it only takes a few minutes to apply [and a]pplicants are notified immediately if their request is approved.” Those who do not qualify for an online payment plan (because their tax debt is $50,000 or greater) may be able to work with the IRS to set up an installment plan.

Delayed Collection

Delayed collection is an option for qualifying taxpayers who are unable to pay on Tax Day but expect to be able to pay in the future. Similar to payment plans and installment plans, interest and penalties continue to accrue with delayed collections. Taxpayers must contact the IRS to request delayed collection before the IRS initiates collection efforts.

Penalty Relief

The IRS offers penalty relief to taxpayers who have “reasonable cause” for failing to pay on time. Taxpayers who have a history of compliance may also qualify for relief under the IRS’s First Time Penalty Abatement policy.

Offer in Compromise

Negotiating an offer in compromise with the IRS affords the opportunity to settle your tax debt for less than the full amount you owe. You may qualify for an offer in compromise if you cannot afford to pay or paying the full amount you owe would result in severe financial hardship.

Discuss Your Options with Maryland Tax Lawyer Kevin E. Thorn

If you cannot afford to pay your 2022 tax bill, it is important that you speak with a lawyer to make sure you choose your best option. To request a confidential consultation with Maryland tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 240-235-5096, email ket@thornlawgroup.com or tell us how we can reach you online today.