4 Pitfalls to Take (and Better Options) | Personal finance
Don’t stiffen up the IRS
If you can’t pay your tax bill, it might be tempting not to file a return. But not filing a return carries much higher penalties than nonpayment, says CPA Neal Stern, a member of the American Institute of CPA’s Commission for Financial Literacy. Additionally, there is no limitation period on audits when you fail to file. The IRS can come after you years or decades later.
The IRS has payment plans that allow you to pay your bill over time. You can also charge a tax bill on a credit card or consider getting a personal loan to pay off what you owe, Stern says.
Ignoring the situation is not a solution. The IRS has automated processes that match forms like W-2 and 1099 to tax returns, and if anything is missing, it can quickly lead to a computer-generated discrepancy notice or audit, Stern says.
If you owe and don’t pay, the IRS can seize your bank accounts or seize your wages and other income until all unpaid taxes, penalties and interest are collected, Stern says. The IRS can even seize and sell your property.
“The IRS is probably the most powerful and relentless collection agency you can meet,” Stern said. “If you owe taxes, you better pay as much as you can, as soon as you can. “
This article was written by NerdWallet and was originally published by The Associated Press.