OWED

Nov 30, 2010

Taxes Owed
by: Mary

I cannot comment on whether or not you will owe money on your taxes this coming year because I do not know the details of your finances. Also, I am not clear if your question relates to your federal taxes or the income taxes you may owe to the State of Connecticut. The information in this answer relates specifically to federal taxes, but it should also generally apply to your state income taxes. For specific information and advice on paying your CT taxes, talk with a tax CPA in your area.

It's important to file your taxes on time every year even if you cannot afford to pay what you owe. If you can pay at least some of what you owe when you file your taxes, do so. That is because beginning on April 16th, the IRS will start charging you interest and penalties on whatever you still owe to it.

One option when you are short of cash is to pay your taxes with a bankcard, like Visa or MasterCard. Doing so will allow you to avoid accruing interest and penalties. Another option if you don't have a bankcard or you cannot use the card to pay your taxes, is to contact the IRS immediately to set up a plan for paying your tax debt over time in installments. Remember, the faster you pay off the debt, the less you will pay in interest and penalties!

Another option is to make an Offer in Compromise (OIC) to the IRS, which is an offer to settle your debt for less than the full amount that you owe. However, OICs are difficult to negotiate and are most appropriate when you owe a lot of money to the IRS.

Finally, people who are in dire financial straits often file for bankruptcy when they cannot afford to pay their taxes. Bankruptcy lets them avoid having the agency put a lien on some of their assets. However, once their bankruptcy is over, they still owe the past due taxes.

Now that I've reviewed what your options are when you cannot pay the taxes that you owe, I would advise you to pay the $175 that you owe in past due taxes right away. Be sure to write your Social Security # on the check and to note the year that the taxes are for. Eventually, the IRS will get in touch with you to tell you how much you owe in interest and penalties. Once you receive that notice, pay the amount immediately.

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