In today’s tough economic times, millions of Americans find themselves unemployed or with a significantly smaller income. Unfortunately, two things are still certain in life, and one of those things is taxes. As the tax deadline approaches and fear and anxiety sets in, it is important to know that there are measures that can be taken for those who are unable to pay their taxes due to a loss in employment.
Even if you are unable to pay the taxes that you owe, the most important thing to know is that you must still file your return on time to avoid costly penalties and fees. Paying even a fraction of what you owe, if possible, will help to reduce interest that will accumulate while you search for a new job.
The best thing to do if you are unable to pay is to contact the IRS directly. Despite its reputation of being a cutthroat, no nonsense agency, the Internal Revenue Service is actually very amicable when dealing with people who are struggling and are unable to pay their taxes. “Times are tough for people, and the IRS wants to do everything it can to help people who have lost their job or face financial strain,” says IRS Commissioner Doug Schulman. “We continue to make adjustments to key programs and expand ways for people to get help. We’re doing everything we can to ease the burden on struggling taxpayers.”
So, exactly what options does a person have if he or she is unable to pay? For some, an offer in compromise is the best choice. An offer in compromise is an agreement between the taxpayer and the IRS to settle a debt for less than the full amount owed. IRS employees have an increased amount of flexibility when considering such offers. They are now able to consider a person’s current and future employment status when negotiating a settlement with the taxpayer, rather than the previous method of only considering previous years’ income levels.
Another option for struggling taxpayers is to arrange installment payments with the IRS. Many people who are unemployed or have seen their income greatly reduced are simply not able to pay all of what they owe. By working out a payment program with the IRS, these people are able to pay what they owe little by little, without incurring more penalties and fees.
A struggling taxpayer may find value in attending an IRS Saturday Open House, where he or she can sit down with an IRS employee to resolve the issue at hand. During these sessions, the taxpayer can address any financial hardships and get help claiming any of the special tax breaks that are offered for exactly that type of person. These include: the Homebuyer tax credit, the American Opportunity credit, the Making Work Pay credit, and the Expanded Earned Income tax credit. By taking an hour or two to sit down with a tax expert, an unemployed taxpayer can take advantage of every option available, even many that he or she didn’t know even existed.
Taxpayers who are unemployed and struggling can find more information on a new page on the IRS website, IRS.gov. This online tax center contains a number of other resources and options available for those who need help.