From Owing $10,000 to $15,600 in 5 Months?

Do you have any credit cards that charge you 47.5% interest? If you answered “No ”…Don’t be so sure. ..you might end up paying the government this much in interest and penalties?

Did You Not File at All? If you didn’t file taxes this past year (or any other year for that matter), interest is being compounded daily on what you owe – the quarterly federal short-term tax rate, plus 3%. As of this writing, the IRS is charging 8% per year. Non-filers also pay a .5% late payment penalty plus a 4.5% late filing penalty, for a combined penalty of 5% for the first month your return is late. Every month that you don’t file – your penalties double…until 5 months when it caps at 47.5% (22.5% late filing penalty + 25% late payment penalty).

What You Should Do If You Haven’t Filed. By all means, file your taxes…even if you can’t afford to pay the tax that’s due. Here’s why: Every day you don’t file you’re getting charged the huge non-filing penalty I’ve described in the section above.

By filing your taxes and not paying them, you’ll at least go from Non-Filing to Non-Paying status. This will enable you to qualify for one of the 5 negotiating tactics:

-Be declared Non-Collectible Status

-Have the debt reduced through an Offer-In-Compromise

-Set up a monthly installment agreement plan

-Set up a partial pay installment agreement (where you pay less than the total owed)

-Declare Bankruptcy

If you don’t file your taxes, you won’t qualify for any of these ways to pay down your debt. You’ll still be considered a non-filer.

Did You File and Not Pay? If you filed but didn’t pay the tax, that’s a little better, but don’t breathe easy just yet. If you don’t figure out a way to pay it soon, the IRS will start coming for their money in ways that you don’t want them to; like tax liens, wage garnishments, levies and seizures. If you didn’t pay up, there’s interest being compounded daily on what you owe, which is the quarterly federal short-term tax rate, plus 3%. As of this writing, the IRS is charging 8% per year. But remember that in addition to interest, you’re also being charged a Failure-to-Pay Penalty, which is .5% of the tax owed for each month. There is no maximum for the failure-to-pay penalty. If you’re sent a number of notices from the IRS and you still don’t pay, the penalty increases to 1%.

What You Should Do If You Filed and Didn’t Pay. The most obvious answer is to pay the debt. So what if you just can’t come up with the money? There are legal ways to negotiate with the IRS as discussed above.

All of these options have their pros and cons, and depending on your situation – one choice may be a lot better than the other. If you have a tax problem, whether it is non-filing or non-payment for any reason, please contact Florida Tax Attorney Mary E. King to discuss your situation at (941) 906-7585.