Can’t Pay Your Taxes Yet? Here’s How to Request an Extension
Tax season has come and gone, but many are still struggling with a tax debt they might not know how to deal with.
See: Need Help Paying For Your Taxes? The IRS Has Several Options for You
Find: IRS Releases Top 10 Tips for People Who Owe Money on Their Taxes
With the financial hardships of the pandemic and an uncertain labor market, the IRS offers a way for you to delay having to make any payment at all — an extension.
This is similar to the payment plans the IRS offers for tax bills. But with the payment plans, you have to start making payments right away. Extensions, on the other hand, are designed for those who cannot pay any amount of their tax debt and need to delay the payment process altogether.
If the IRS determines that you truly cannot afford to pay any of your debt, it can report your account as currently not collectible and temporarily delay collection until your financial condition improves. An account labeled as not collectible does not mean that the debt goes away. Rather, it simply indicates that the IRS has paused the debt for a specified period of time.
See: Is Taking Out Loans to Pay Off the IRS a Good Idea?
Find: How to Get on an IRS Payment Plan
To request an extension, complete a Collection Information Statement using Form 433-F, Form 433-A (for wager earners and self-employed individuals) or Form 433-B (for businesses). The appropriate form must be submitted along with proof of your financial status. Proof of financial status must include information about your assets and your monthly income and expenses.
The IRS states that should you be granted an extension, your debt will effectively increase because there is no pause on penalties and interest. Although this will not affect the underlying principal amount, it will increase interest and penalties you pay on that underlying principal amount, adding to the overall amount due.
See: What Happens If You Don’t File Taxes
Find: What Happens to Your Credit When You Don’t Pay Your Taxes?
The IRS will periodically assess your ability to pay.
Another important thing to consider: As part of the IRS collection process, the agency can file a Notice of Federal Tax Lien against your assets to protect the government’s interest in your tax debt.
More From GOBankingRates
What Money Topics Do You Want Covered: Ask the Financially Savvy Female
