The brave new economy means many Georgia residents are working for themselves. They own their own small business, or are in a situation where they are responsible for paying their own taxes. While this provides you with freedom and autonomy, it also means there is no withholding that ensures your have cash to pay the taxes when they are due.
This can be a problem. If April 15 arrives and your tax bill exceeds your checking account, what should you do? Even if you cannot pay the taxes, you need to file a return. The IRS does not look kindly on the failure to file an income tax return.
If you fail to file, the IRS may file for you, and they don’t spend a great deal of time doing it. You essentially pay the maximum tax possible, as they use your income and give you the single exemption for yourself.
Now, if you file a return, but don’t include a check for the taxes, the IRS will still need their money. You can set up a monthly payment plan, but you need to make sure your payments will cover the total due before next year’s taxes.
If your situation is more severe and you own a substantial amount in back taxes, you may need to consider the IRS Offer in Compromise (OIC). The OIC requires a more complex form, and detailed information related to your personal and business finances.
If you think you may need to use an OIC, you should speak with an experienced tax attorney, to ensure your rights are protected and all information is properly submitted and accurately.
Source: Yahoo Finance, “First Person: IRS Payment Plan vs. IRS Tax Settlement,” S.L. Carroll, Feb. 7, 2013