Can’t pay your 2019 tax bill by July 15, 2020?

If you have a tax bill for 2019 that you can’t quite pay, you do have options.

Even if you can’t pay in full, I’d highly encourage you to file your return on time, which has been extended from April 15 to July 15 this year due to the pandemic and resulting recession. This way, you avoid the late filing penalties that can be added on to your tax liability, which can add up to 25% of your balance due. Also, try to pay as much as you possibly can with your return. If you are going to be filing an extension, pay as much as you can with your extension.

The IRS is currently charging a 5% annual interest rate, compounded daily, on all tax debts. On top of that, you will be subject to a failure to pay penalty, which will further increase your tax debt.

It may be worthwhile to consider using credits cards or a loan to pay your tax bill. When you consider the extensive penalties the IRS charges, your credit card interest rate may actually be quite a bit lower.

If you absolutely cannot pay your tax bill this year, then use either the online payment agreement request system at irs.gov, or complete Form 9465 to request a payment plan. You are not required to wait until the IRS bills you before requesting a payment plan.

The most important thing to remember is that, in order to avoid the wrath of IRS Collections, it’s in your best interest to be proactive about managing your tax debt. Don’t wait for the IRS to come to you: Take the high road, and address it head on.

If your tax debt is simply too large for you to pay in any reasonable amount of time, it’s worth considering your other options. One of our vetted and verified tax firms near you can provide complete guidance for resolving your back tax liabilities, particularly if your situation is more complex, such as multiple years worth of tax debt to address. Search our directory using the box at the top of this page.

Don’t give the IRS the upper hand. Stay on top of your tax situation and address the issue long before the government starts coming after you.… Continue reading

Challenging Property Tax Assessments

Your annual property tax bill is based on your county government’s valuation of your property. Assessed values are often very different from the actual fair market value of your home. If your county assessment is too high, resulting in a property tax bill that is more than it should be, you can contest the property valuation in an attempt to reduce your tax bill.

The fair market value of your property is represented by the price that a typical home buyer would be willing to pay for your house. Arriving at the fair market value of your home without actually selling the house is accomplished by comparing your home to other houses that have sold. A proper comparison requires that the other houses be as similar to your house as possible. The best comparable properties will have nearly the same square footage and number of bedrooms and bathrooms as your house. In addition, they will be in the same neighborhood and will have sold within the last few months. This process is very similar to how appraisers determine the vale of your home.

There are two types of assessed value that local governments use to determine your property tax bill: Market assessed value and tax assessed value. Market assessed value is the government’s estimate of the fair market value of your home. This valuation is often based on the last sale price of the property, adjusted occasionally for appreciation. Since many counties multiply all properties by the same appreciation rate, the assessment may not take into account unique features of your home, location, or the modern realities of your local real estate market. Some localities will further multiply your market assessed value by some other fraction in order to arrive at the tax assessed value, and then apply your local tax rates to this number.

When the assessed value on which your property tax bill is based is higher than the actual fair market value of your your home, you may end up paying too much property tax. Most counties offer informal hearings at which you can challenge the assessed value. To prove your case at this hearing, you should be armed with an appraisal, a Broker Price Opinion from a licensed real estate agent, or your own list of recent comparable sold properties. You may also have the option of appealing the assessment valuation to a review board. In rare cases, you may … Continue reading

Quick Guide to Late Filing, Amended Returns, and Late Payment Penalties

In most years, April 15 is the deadline for the majority of Americans to both file their tax return and pay any taxes that are due on that return. If you don’t file on time, you potentially face one set of penalties. If you don’t pay by this date, there’s another set of penalties that applies.

Here’s the good news for individuals that are unable to pay by the normal due date: The late payment penalty isn’t nearly as stiff as the late filing penalty.

The reason for this is because the IRS is far more interested in knowing how much you owe rather than having you pay it on time. They rely heavily on people filing their tax returns in order to make the proper tax assessment (never let the IRS do your tax return for you). Knowing how much you owe them starts a well defined process, but when the IRS doesn’t know how much you owe, they can get pretty grumpy about it.

Of course, the more you pay with your tax return or extension, the lower your penalty and interest charges are going to be in the long run. This is because all of your penalties and interest are a percentage of the unpaid balance due after April 15th.

The penalty for not filing a tax return is typically 5% per month or part of a month. One day is considered “part of a month”. This penalty caps out at 25% of the unpaid balance. Do note that if you properly file an extension, and pay the balance with the extension, then there is no penalty. The extension form essentially gives the IRS the same bottom line “amount due” number that they are looking for, just without the math showing how you came up with it. With your extension, you must pay at least 90% of the balance due on the final return in order to avoid penalties.

As already mentioned, the penalty for not paying is far less than the penalty for not filing. This amount is one half of one percent per month (or part of a month).

If you are subject to both the non-filing and non-payment penalty in the same month, the combination of the two penalties together is capped at 5%. If you file your return more than 60 days after the April 15th deadline (or after the extension deadline), then the minimum … Continue reading