It’s October. My favorite time of the year. The holidays are coming fast and will be here before you know it. The cooler weather should be here soon. Plus, October is the month that I first met my wife, now a long, long time ago (but she still looks as beautiful as the day I met her).
October is also the last month of the official tax filing season. The extension for individuals expired Oct. 15. Of course, many people who finish their tax returns at this time of the year owe money. Yes, that sucks for them. It sucks even more when they do not have the money to pay that tax bill.
This can happen for many reasons. I will give you a few examples of how people get into this pickle:
- They changed employers and their new Form W-4 did not have enough federal withholding taken out.
- They could have changed employers and now they work for someone who pays them on a 1099-NEC as an independent contractor (this is a whole separate issue on whether this is appropriate or not). Therefore, there is usually not any federal withholding paid into the IRS.
- Business could have been doing well before and now it is not when the tax is coming due.
- They are selling a property with a large taxable gain, but not getting any cash out at the sale.
So, what is a person (or business) to do? Well, fortunately there are many options to choose from; however, please note that the options can only apply if your facts and circumstances allow for it.
Most people will fit into the bucket that allows them to fully pay their tax, penalties and interest over a payment plan. This is typically paid over 72 months. Depending on the dollar amount you owe, you may not have to provide any forms or documents to set this up.
It may be that you can pay some payment but not the full payment that allows to pay it in full. The IRS can allow you to enter into a partial payment plan. If this is the case, the IRS is going to need Form 433-A for individuals or 433-B for businesses along with A LOT of documentation. They are going to vet and confirm the information you provide, so please be honest.
If you do not have any (or much) equity in assets and you do … Continue reading