Can’t Afford To Pay Taxes on Time? Here Are Your Options

November 15, 2023

If you find yourself unable to pay your taxes on time, both the federal government and the state of Louisiana offer options to help manage your tax liability, including an option for tax forgiveness in some instances. It’s crucial to address the issue head-on rather than avoiding it to prevent additional penalties and interest, so talk with a Louisiana tax resolution specialist right away to decide the next step to take.

Federal Tax Payment Options

The IRS offers short-term payment plans if you think you can pay your full tax liability within 120 days. There is no setup fee for this option, and it can be requested through the Online Payment Agreement application on the IRS website or by calling the IRS directly.

If you need more than 120 days to pay your tax bill, the IRS has long-term payment plans known as installment agreements. These agreements do come with a setup fee, and the total amount of penalties and interest you will end up paying will be higher than with a short-term plan. However, an installment agreement can make large tax bills more manageable over time.

Louisiana State Tax Payment Options

The Louisiana Department of Revenue also provides installment agreements for taxpayers who cannot pay their full tax bill immediately. Similar to the federal options, these agreements allow taxpayers to make monthly payments towards their tax liability.

Important Considerations

It’s important to understand that both the IRS and LDR will charge interest and penalties on taxes not paid by the due date, even if you have entered into a payment plan. The sooner you can pay your tax liability, the less you will pay in penalties and interest. An experienced tax consultant can be invaluable in navigating these options.

Temporary Delay of Collection

If you’re unable to pay anything towards your tax debt, the IRS and LDR can temporarily delay collection until your financial condition improves. However, your tax debt will increase due to penalties and interest until the full amount is paid.

What About Tax Forgiveness?

Tax forgiveness options are available both with the IRS and in Louisiana, although they are granted only in specific circumstances.

IRS Tax Forgiveness Options

Offer in Compromise (OIC)

This program allows taxpayers to settle their tax debt for less than the full amount owed if they can demonstrate that paying the full amount would cause financial hardship, there’s doubt as to the liability of the tax debt, or the IRS believes it’s unlikely the full amount can be collected. The IRS considers the taxpayer’s income, expenses, asset equity, and ability to pay.

Penalty Abatement

If a taxpayer has a reasonable cause for not meeting tax obligations, such as natural disasters, medical emergencies, or other extenuating circumstances, the IRS may provide relief from penalties.

Innocent Spouse Relief

This provides relief from additional tax owed if a spouse or former spouse failed to report income, reported income improperly, or claimed improper deductions or credits.

Louisiana Tax Forgiveness Options

Offer in Compromise

Similar to the IRS, the Louisiana Department of Revenue may accept an Offer in Compromise from taxpayers who can show that they are not able to pay the full amount of taxes owed due to financial hardship.

Penalty Waivers

Louisiana may waive penalties for late payments if the taxpayer provides a reasonable cause or if the failure to pay was due to circumstances beyond their control.

Amnesty Programs

Occasionally, the state offers programs that allow taxpayers to settle their outstanding tax liabilities, including interest and penalties, under more favorable terms than usual.

Prioritizing Tax Debts: Strategies for Payment

Federal Tax Prioritization

With the help of your tax consultant, scrutinize each component of your federal tax bill. Ensure that you understand which parts are tax, penalties, and interest. Sometimes there are opportunities to reduce penalties or interest based on reasonable cause or through penalty abatement requests, which a tax consultant can handle on your behalf.

The Offer in Compromise (OIC) program allows qualified individuals to settle their tax debt for less than the full amount owed. Your tax consultant can determine if you’re eligible and assist in preparing the necessary documentation. The OIC is a complex process, and professional help here will significantly increase your chances of being accepted by the IRS.

State Tax Prioritization

A tax consultant with experience in Louisiana law can help explore all state-specific remedies that may not be available at the federal level, such as special extensions or state tax amnesty programs. Just like with federal taxes, penalties on your state tax bill can sometimes be reduced or removed.

Your tax consultant can negotiate with the LDR and file for penalty abatement if you have a reasonable cause, such as a natural disaster or serious illness that prevented timely payment.

Taking Action

Contacting Tax Authorities

Your tax consultant will contact the IRS and LDR on your behalf. They can clarify your situation, negotiate terms, and set up the necessary arrangements. Their expertise allows them to communicate effectively with tax authorities, often yielding better results than if you were to go it alone.

The tax consultant will assist in setting up the best payment arrangement for your situation. This includes filling out any forms and providing the necessary financial information to the IRS and LDR. They can also help you understand the implications of each payment option and how it fits into your overall financial planning.

Maintaining Compliance and Managing Financial Health

As you work with your tax consultant to set up a payment plan or negotiate an Offer in Compromise, maintaining compliance with the IRS and the Louisiana Department of Revenue is crucial.

Keeping to Payment Plan Terms

Once a payment plan is established, it is imperative to meet all payment deadlines. Your tax consultant will help you understand the terms of your agreement and set up reminders for due dates. They’ll can also advise you on strategies to ensure you have the necessary funds when payments are due.

Adjusting to Changes in Financial Situation

If your financial situation changes, for better or worse, your tax consultant can help reassess your payment plan and make adjustments as necessary. They can negotiate with tax authorities to modify your agreement, ensuring that it remains manageable.

Ensuring Future Tax Compliance

Your tax consultant will also help you plan for future tax years, ensuring that you don’t find yourself in the same predicament again. This may involve adjusting withholdings, making estimated tax payments, and offering advice on financial planning to reduce your future tax liability.

Proactive Tax Management with a Louisiana Tax Resolution Specialist

A professional can help you before you get into tax trouble as well as after. They can help you develop a proactive strategy for managing your taxes going forward. This includes advising on tax-efficient investments, retirement planning, and other financial decisions that have tax implications. Tax consultants are also skilled in identifying tax-saving opportunities that you may not be aware of. They can guide you through tax credits, deductions, and incentives that can reduce your overall tax burden.

The expertise of Geaux Tax Resolution can help you, no matter where you are in your tax journey. We’re experts in dealing with both the IRS and the LDR. Contact us at Geaux Tax Resolution today to secure your financial peace of mind.

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