As entrepreneurs, we can get busy and the days can fly by as we engage in the activities that we love. If you are like me, you don’t like to stop and spend time on something as mundane as taxes but I have convinced myself that I should consider the chunk of money that it takes from earnings and pay the appropriate attention to it.
After all, it is the taxpayers responsibility to ensure that taxes are neither overpaid or underpaid.
Now the smart thing for entrepreneurs to do is to project their income and pay the quarterly installments required by the IRS. This way when the deadline comes around, you are not caught with your pants down.
If you are this squared away, then kudos! If not, this article is for you.
The IRS urges you to file on time even if you can’t pay what you owe. This saves you from potentially paying a penalty for a late-filed return.
Here is what to do if you can’t pay all your taxes by the due date.
1. File on time and pay as much as you can. You can pay online, by phone, or by check or money order. Visit IRS.gov for electronic payment options.
2. Get a loan or use a credit card to pay your tax. The interest and fees charged by a bank or credit card company may be less than IRS interest and penalties. For credit card options, see IRS.gov.
You can also file Form 9465, Installment Agreement Request, with your tax return. You can even set up a direct debit agreement. With this type of payment plan, you won’t have to write a check and mail it on time each month.
4. Don’t ignore a tax bill. If you get a bill, don’t ignore it. The IRS may take collection action if you ignore the bill. Contact the IRS right away to talk about your options. If you are suffering financial hardship, the IRS will work with you.
5. File to reconcile Advance Payments of the Premium Tax Credit. You must file a tax return and submit Form 8962 to reconcile advance payments of the premium tax credit with the actual premium tax credit to which you are entitled.
You will need Form 1095-A from the Marketplace to complete Form 8962. Failure to reconcile your advance payments of the premium tax credit on Form 8962 may make you ineligible to receive future advance payments.
Remember to file on time. Pay as much as you can by the tax deadline and pay the rest as soon as you can. Find out more about the IRS collection process on IRS.gov. Also check out IRSVideos.gov/OweTaxes.
Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on IRS.gov.
To your Success,
p.s. there is a FREE tax consultation from our friends over at Elevation Tax. Invest some time in getting your business set up right!