Your federal tax return, with any taxes owed, is due on April 17. What should you do if you cannot pay?
- If you cannot pay your taxes because it would result in undue hardship, you may qualify for a 6 month extension to pay. In order to qualify for this extension, you must file form 1127 by the due date of the return. Your reason for extension will need to be explained and documented in order for consideration.
- If you cannot pay your taxes and do not qualify for the automatic extension given above, there are still options:
- If you owe less than $50,000, you can apply to set up a payment plan using the IRS’s Online Payment Agreement Application
- In some cases, taxpayers who will never be able to pay part or all of their taxes may qualify for an offer-in-compromise. Generally, the IRS will look at the taxpayer’s income and assets to determine if they have the ability to pay.
- You have the option to pay your federal (and most state) taxes using a credit or debit card. The payment cannot be made directly to the IRS but must be paid through a designated e-pay service provider, who then charges a fee to the taxpayer. Consult with your financial advisor to determine if the e-pay fee and credit card interest, with the deduction of “points” earned, is less than the potential cost of interest and penalties charged by the IRS.
If you cannot pay your taxes and none of the above applies to you, it is important to still file your tax return on time to avoid substantial failure to file penalties. If you have any questions, please contact the Gray, Gray & Gray tax department at (781) 407-0300.