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  • Brian Barto

What Happens If I Can’t Pay My Taxes | Filing vs Not Filing | Winchester, VA

Updated: Jun 19

We prepare a lot of federal and state tax returns in Winchester, VA and at times have clients that cannot pay the taxes due, and decide not to file the tax return at all. Bad idea! Even if you are unable to pay the tax you owe, it is important that you still file the taxes and file ON TIME.

One of the biggest penalties assessed by the IRS is the Failure to File penalty. If you fail to file you just potentially added an additional 25% to your tax bill. The penalty for failure to file is 5% of the tax due each month. This means the IRS adds a 5% penalty EACH MONTH that your tax return remains un-filed. The maximum penalty of 25% will accumulate in just 5 months.

We suggest you deal with the issue. Believe it or not, according to Internal Revenue Code (IRC) 7203, you can be charged with a misdemeanor for willful failure to file a return. Now, the IRS rarely invokes this criminal statute, but it is in the law. Nevertheless, not-filing exacerbates the issue and shows bad faith and makes it much more difficult to negotiate a deal with the IRS.

Also, very important in this process is to understand why you owed the tax in the first place. Might be too late to change anything now, but at least you can make some adjustments for the future. We often see clients that are very surprised at tax-filing time when they owe tax. They may say, “I never owed tax before…what happened?” This is one of many reasons using a tax professional to prepare your taxes is a good idea.

A competent tax professional can explain in detail what happened and help you prevent the same from occurring again. When you get your taxes filed, have a tax planning discussion with your tax professional. Inform him/her of any changes for the upcoming year.

Get the tax returns filed, then pursue a resolution to your tax issue. Resolutions may include:



  1. Installment Agreement: You have some ability to pay, but are unable to pay the entire amount now. In this case, you may create a payment plan with the IRS to pay your tax debt over a period of time. There are several types of Installment Agreements depending on the how much you owe and your history of compliance with the IRS (prior debt and whether all of your prior year tax returns have been filed)

  2. Uncollectible: If you are truly unable to make any payments at all, you may be able to get your account into “uncollectible” status.

  3. Offer In Compromise (OIC): The most common type of OIC is called, Doubt as to Collectibility. This occurs when the debt is so substantial that you will not be able to pay it off. Please note, whether you can pay it off (or “full pay” within time remaining on the collection statute) is a decision the IRS will make based on a formula. The formula includes your income, expenses, and equity in assets.

At Tax Debt Resolution Services of Winchester VA, our mission is to help you eliminate your IRS issues and the stress the IRS has created in your life and help you get back to doing what you do best! We help our clients in Winchester VA, Strasburg VA, Martinsburg WV, and Charles Town WV to resolve their tax debts!. If you need assistance please feel free to contact me at 540-662-4432 or brianbarto@libertytax.com.

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