Filed under: Debt, Debt Resolution, IRS Debts, Unemployment
I write a lot about what to do if you can’t pay the IRS, but this is new stuff just for 2011 taxes. If you’re out of work, or if you’re self-employed and your income is lower than last year, you may be able to apply for an extension of time to pay your 2011 income tax–so you don’t get hit with late payment penalties.
- First, your adjusted gross income (that’s line 38 on form 1040) must be less than $100,000 (or $200,000 if you’re married filing jointly.)
- Second, you need to owe the IRS less than $50,000.
- Losing your job, for one. If you were unemployed for at least 30 consecutive days in 2011 or the first part of 2012, then you can apply for relief.
- Or, if you’re self employed, if your business income is 25% or more less than what it was in 2010, then you also can qualify.
- The relief is only good for your 2011 taxes.
- It only helps with the failure to pay penalty, you’ll still have to pay the interest on your late payment (about a 3% annual interest rate.) You’ll also have to pay any other penalties that you might owe.
- If you don’t pay the amount of tax you owe in full by October 15, 2012–then you’ll still wind up paying the penalty and it will be back-dated to April 15th.
- If you apply for the late payment relief, you must have your tax return or extension filed on time.
The form you need is called: Application for Extension of Time for Payment of Income Tax for 2011 Due to Undue Hardship. That’s a mouthful isn’t it? Fortunately, it’s easier to fill out than it is to say. The form number is called 1127-A. Here’s a link to the IRS website so you can download it yourself:
Besides stuff like your name and address, you only need to know your adjusted gross income and the amount of tax you owe. You can’t e-file the form with your tax return, you have to print it and mail it in. It doesn’t go to your regular tax office–it’s either going to be mailed to Huntsville, New York or Fresno, California. Look at the instructions on page 3 of the form to learn where you should mail your form.
Basically, if you owe taxes and can’t pay, the IRS charges ½ of one percent on the balance due each month that you haven’t paid. So, after 5 months–that’s a 2.5% penalty. So if you owe $5,000 that would cost you an extra $125. That might not seem like that much but why pay the IRS more than you have to? If you think you can come up with the money within 5 months–why not take advantage of the break?