Can't Pay Income Taxes

by Steve
(South Carolina)

Can't Pay Income Taxes

I withdrew $30,000.00 from a retirement acct. to survive. At tax we found that we owed $8040.00 in taxes(federal).

We did not file the taxes. We did however file the next year and are due a refund. We have not recieved it but did get a State refund.

Should we re-do the original filing not reporting the withdrawal? We are unemplyed at the present time and we are in no condition to pay anything at all...

Can't Pay My Taxes

What if I can’t pay my taxes?

Hello,

Thank you for your question.

If you can't pay your taxes, first of all - don’t panic! If you cannot pay the full amount of taxes owed by the April deadline, you should still go ahead and file your return by the deadline and pay as much money as you can in order to avoid paying penalties and interest.

You also should contact the IRS to discuss your payment options at 1-800-829-1040. The IRS may be able to provide some relief such as an installment agreement, a short-term extension to pay, or an offer in compromise. In some cases, the agency may even be able to waive penalties.

However, the IRS is unable to waive the interest charges which accrue on your unpaid tax bills. For more information, see "The Collection Process" and "Tax Payment Options" at www.irs.gov. The Form 1040 Instructions also provide guidance on filing and paying your taxes.

All the best to you!

Will Not Be Able To Pay

by Bill
(Salt Lake City, UT, USA)

Hi! I know I am going to be in a bad situation next April (2010) and I am wondering if there is anything (other than finding/saving/making all the cash that I can) that I can do now to help my situation then.

Here's the story... I am in early retirement, unemployed, and not eligible for unemployment. I was trying to sell my Seattle home to move to Salt Lake City (better potential for jobs I thought). The home did not sell (8 months). My wife and son had already moved to Salt Lake. It had been 8 months with no hope, the economy was in the toilet, my IRA was worth 1/2 of it's original value and shrinking, and my wife was at her end with us being separated. Just after the new year we decided that I should cash out the IRA and purchase a home in Salt Lake. We did this, accepted the $30K penalty that would be due next April (2010) assuming that I would easily be able to find work and save for this. We bought a home for $270K lock, stock, and barrel and rented out the Seattle home. In order to do this, we also used $70K of the $100K equity line on our Seattle home. This has been pretty nice because we have someone else paying our Seattle mortgage/ins/taxes and our current bill is but $300/month. The problem is that I have not been able to secure a full time job. And the prospects are dismal. Hoping for the best but planning for the worst now. I am pretty sure that we will be out-of-funds in January. I will be able to get part-time work and cover our bills and food, but I am fairly certain that I will not be able to meet my tax bill. Should I contact them now, in January, or wait until April? Any advice on handling the tax bill?

Hi Bill!

Great Question.

Your best bet would be to file your taxes before the April 15th deadline along with an installment agreement request, form 9465.

You can let them know how much you are able to pay each month and on which day of the month you would like to pay. The IRS is always willing to work with you on making payments.

Best of luck to you.

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