Q. I blew it. I owe tax and don’t have any money. What do I do? Am I going to jail? Should I hide?
A. The worst thing you can do is ignore the problem. If you owe tax with your federal tax return, but can't afford to pay it all when you file, there are some things you can do to keep interest and penalties to a minimum.
· File your return on time and pay as much as you can with the return. By doing this it will eliminate the late filing penalty, reduce the late payment penalty and cut down on interest charges
· Consider obtaining a loan or paying by credit card. The interest rate and fees charged by a bank or credit card company may be lower than interest and penalties imposed by the Internal Revenue Code
· Request an installment payment agreement. You do not need to wait for IRS to send you a bill before requesting a payment agreement. Options for requesting an agreement include:
• Using the Online Payment Agreement application and
• Completing and submitting IRS Form 9465-FS, Installment Agreement Request, with your return IRS charges a user fee to set up your payment agreement. See www.irs.gov or the installment agreement request form for fee amounts.
· Request an extension of time to pay. For tax year 2011, if you qualify you may request an extension of time to pay and have the late payment penalty waived as part of the IRS Fresh Start Initiative.
To see if you qualify visit www.irs.gov and get form 1127-A, Application for Extension of Time for Payment. But hurry, your application must be filed by April 17, 2012. Good luck, and start saving for 2012. Estimated payments are due 4/15/12, 6/15/12, 9/15/12 and 1/15/13. I would work on the 2011 first.
