Why You Should File Your Tax Return Even If You Can’t Pay

Filing your tax return on time is essential, even if you can't pay the full amount you owe. Here’s why this matters and what you should do if you find yourself in this situation.

1. Avoid the Worst Penalties

The IRS imposes a much larger penalty for failing to file than for failing to pay. If you don’t file your return, the penalty can be 5% of the unpaid tax per month, up to 25%. If you file but can’t pay, the penalty is only 0.5% per month. Filing on time, even without payment, minimizes the amount of penalties you’ll face.

2. Keep Your Options Open

Filing your return allows you to access IRS payment plans and relief programs. You may qualify for an installment agreement, a short-term extension, or even a temporary delay in collections if you’re experiencing financial hardship. None of these options are available if you haven’t filed your return.

3. Limit Interest and Additional Charges

Interest and penalties start accruing the day after the tax deadline. Filing your return and paying as much as you can, even a partial payment, reduces the overall amount you’ll owe in the long run.

4. Protect Your Refund and Credits

If you’re owed a refund, you won’t receive it unless you file. Even if you owe, filing allows you to claim tax credits and deductions that could lower your balance due.

5. Avoid Escalating Enforcement

Failing to file can lead to aggressive IRS actions, such as tax liens, levies, or wage garnishments. Filing your return, even without payment, shows good faith and can help you avoid the harshest collection measures.

What to Do If You Can’t Pay

·         File your return by the deadline or request an extension.

·         Pay as much as you can, even if it’s not the full balance.

·         Consult with a tax professional to discuss payment options or relief programs.

·         Don’t ignore the problem; taking action is always better than doing nothing.

Filing on time, even if you can’t pay, is the smartest step you can take to protect yourself financially and legally. 

    

Marini & Associates, P.A. 

 

 

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Read more at: Tax Times blog