If you don't listen to any other tax advice this year, listen to this: If you can't pay your tax bill, at least file the tax return on time and pay some amount -- any amount you can afford.
Why? Whether you file a return or not, you'll owe interest on the unpaid taxes of 1/2% per month. But the penalty for not filing your tax return is an additional 5 (five) percent per month on the tax you owe (up to a maximum of 25%). Thus, by filing your tax return on time, you will save yourself 4 1/2% per month! Note: If your failure to file is proven to be the result of fraud it is 15% per month up to a maximum of 75%.
Also, remember that asking for an extension of time to file the return isn't an extension to pay the bill, only an extension to file the return. Interest keeps mounting.
What happens next?
If you file your taxes without paying the full amount you owe, you will receive a bill. It will demand payment in full and explain why you have a balance due, the tax that is due and any penalties and interest that have been added.
What should you do?
Don't ignore it. Pay what you can and immediately call the IRS to address payment of the additional amount. Ignoring this bill may force the IRS to take legal actions to collect taxes. Why risk putting yourself through an ordeal with the IRS? Grit you teeth and pay it.
