Should You File Your Tax Return If You Can’t Pay Your Bill?

It is April and your tax return is done. On the bottom of the second page it says that you owe money. The amount is more than you can pay so you decide not to file it. Bad move.

By not filing your return on time you incur a 4.5% penalty every month, capping out at 25%. Some people think that they can avoid penalty by filing an extension until October. That is true as it relates to the failure to file, but there is no extension to pay. The failure to pay penalty is .5% a month until it hits 25%. Don’t forget to add in the interest.

If you do not file your return, the IRS may file it for you based on your income information that they receive from other sources. They treat everything as income and allow you only minimal expenses. If you thought your tax bill was too much before, wait until you see what they come up with.

File your return and avoid the big penalty. If you can’t pay, the IRS will most likely give you an Installment Agreement for an amount that you can afford every month. It is tough to be proactive with the IRS, but by tackling the problem now, you will save money you don’t have and stress you don’t need.