So, you suspect you're going to owe the IRS this year. Thinking of skipping your return, possibly delaying it for a while? Think again. While you can file for an extension if it's completely unavoidable, this is by no means a "get out of jail free" card. In fact, you're in for a far uglier ordeal if you put it off indefinitely. If you're not yet sure whether or not to tempt fate, take caution before deciding to sink or swim.
You might think that it's the end of the world if you've got a sizeable (or even not-so-sizeable) tax liability, especially if your finances are stretched thin. You might hope to evade this bill by simply choosing to ignore it, possible moving it to the bottom of your stack, out of sight out of mind. After all, there are literally millions of taxpayers out there; maybe you'll be overlooked. It's important to remember, though, that the IRS is fully aware of how much you owe and whether or not you pay it. And while it's true that the Internal Revenue Service is currently over-burdened and understaffed, this does not mean you're in the clear (more on this in a moment).
Let's assume that you want to pay your tax bill and stay compliant, but there's no way you can afford to pay it all at once. The good news is that the IRS is not completely unreasonable or unsympathetic to your plight. If you can't cover the whole amount you owe by the due date, you may request an extension. Although you may be held liable for a late penalty, you'll still be moving in the right direction. Depending on your situation, you may qualify for an installment agreement, which will allow you to pay the liability over months or even years. Here again, there are penalties and interest with this option, but the sooner you pay it, the cheaper it will be for you. No matter which way you go, taking care of your tax bill beats the alternative ten times out of ten.
If you opt not to pay, let's consider what will follow. First, the IRS is incredibly busy, it's true. Believe it or not, though, that's bad news for you. Should your particular case get pushed behind all of the other taxpayers' cases, this simply means that you'll be notified much later. In fact, it's not unusual for the IRS to send out notices of assessment over two years later. What this means for you is two years' worth of penalties and interest because your bill has now become a debt that's – you guessed it – two years old.
Ideally, the IRS will catch up with you sooner rather than later, if for no other reason than to encourage you to handle it. If you choose to disregard your tax bill and all of the notices that will inevitably follow, the IRS has effective collection methods at their disposal. You could be faced with a lien, restricting and damaging your credit, or you could see a wage or bank garnishment. If it goes on for long enough, they can even seize your property and assets. But it doesn't have to come to that, because you have options.
Whether you have a new tax debt or an aging one, you can and should consult with a licensed tax professional as soon as possible. It's never too late to settle your affairs with the IRS, but the longer you wait, the more expensive it's going to be. You can take comfort in the fact that even if you've previously made the wrong decisions, there's still an out…and a licensed tax professional can help you find it.