Two Cents Tuesday - What if I can't pay my taxes?
I bet you thought tax time was behind us, didn't you?
In reality, though, it's always tax time. Am I having enough withheld? Am I saving enough? How much will I owe? How much will I get back? What impact do the changes to tax laws have on me, if any?
Roughly 1 in 4 Americans will have a tax bill (not a refund) in any given year, and recent tax law changes mean that many people are finding their tax refunds are smaller or gone altogether. If you're self employed, you know this struggle well - particularly if your business is changing rapidly, and/or you don't have the cash to consult with a CPA to do detailed tax planning.
If you're one of the folks who got a bill this year, you might be asking yourself - what happens if I can't pay my taxes?
[Check out the video below to hear all my thoughts on this topic]
In a nutshell, there are a few things you should know if this applies to you*:
There's a difference between failure to file and a failure to pay.
The penalty for failing to file on time is much higher than the penalty for failing to pay on time.
When in doubt, file, even if you can't pay.
Penalties for failing to file and/or failing to pay on time are cumulative (they get worse over time), so file and/or pay ASAP.
Penalty fees for either of these are relatively low. Don't put your taxes on a credit card.
The IRS is nicer than you think. Payment plans are a thing. Ask about them if you need to.
Make sure you save extra this year, and consult with a tax pro to make sure you're in a better place for next year
And if you're one of the folks who got a decent refund this year? Check out my video on what to do with it.