The fast reply? Nothing good.

Many individuals who file a tax return wind up seeing a refund hit their checking accounts after the actual fact. However what if you happen to land within the reverse boat this 12 months?

You may file your taxes solely to comprehend that you simply underpaid the IRS in 2022 and now have a debt to repay. However what if you do not have that cash simply hanging round in your financial savings account?

Not paying a tax invoice might have extreme monetary penalties. So if you happen to’re taking a look at a tax invoice you possibly can’t pay, your finest guess is to achieve out to the IRS as quickly as doable and attempt to work out an settlement.

You may accrue penalties and curiosity

The IRS would not take kindly to being owed cash. So if you happen to’re unable to settle up your 2022 tax invoice in full by April 18, this 12 months’s tax-filing deadline, you must know that you’re going to face curiosity and penalties on the sum you owe the IRS.

The penalty you may be taking a look at is 0.5% of your unpaid taxes for every month or partial month you are late with that cost, as much as a complete of 25%. So for instance, if you happen to owe $1,000 and are six months late in paying that invoice, you may be penalized $30. You may additionally rack up curiosity on the sum you owe, which is separate out of your penalty.

That stated, the IRS is definitely fairly understanding on the subject of filers not having the ability to cowl their tax payments in full. For many individuals, owing cash is one thing that comes out of the blue. So the IRS often works with filers to repay their tax money owed in installments over time. Whenever you join certainly one of these preparations, the penalty for being late along with your funds is reduce in half to 0.025% monthly or partial month you are late.

When you do not pay in any respect

It’s normal to land in a situation the place you possibly can’t pay your total tax invoice in a single fell swoop. However ignoring the issue might result in a really unfavorable consequence.

In the event you do not pay the IRS what you owe, and you do not attain out to get on an installment plan, the IRS will contact you with reminders of the cash you owe. In the event you ignore these notices, ultimately, the IRS can start to garnish your wages to be able to get repaid. And that is not one thing you need.

Now, relaxation assured that if you happen to’re on an IRS-approved cost plan and are present along with your funds beneath it, that will not occur. The IRS can also’t garnish your wages straight away — it’s going to first ship you many notices encouraging you to achieve out and/or pay what you owe. However if you happen to owe the company cash, do not pay, and do not talk in any approach, you may face wage garnishment ultimately.

All advised, the IRS is not essentially as heartless as you may assume. So if you cannot pay your tax invoice, attain out and see what your choices are. You might be stunned at how reasonably priced it’s to repay your debt over time.

That stated, the earlier you are in a position to pay your tax invoice, the much less curiosity and penalties you are apt to accrue. So whereas the IRS may provide you with loads of time to pay that debt, it is in your finest monetary curiosity to knock it out as rapidly as doable.