I have a friend (yes a friend, not me pretending that I have a “friend” with this problem 
) who finally got around to doing his taxes. Much to his surprise he owes $1400. Apparently he, or someone at his work screwed up his witholding. I don’t know if I buy his full story, but there it is Anyway, he simply cannot pay the $1400 by this Saturday. He basically lives paycheck to paycheck and has not planned for this contingency. He does not wish to avoid paying, just the timing is all wrong. He wants to do the right thing, but doesn’t know what his options are. Any advice?
IANH&RB
He should still file on time to avoid a late filing penalty, but arrange to make payment late, or in installations. According to the IRS website, it makes more sense to arrange for a bank loan or to pay in some lowish-interest way than to use the IRS’s own installment program though.
You can attach a note saying basically “Hey, I don’t have all the money” and send a partial payment (important). They will send you a payment plan/form to fill out. This takes little while, so your friend might just be able to scrounge up the rest by the time he gets that info.
I had to do this a number of years ago; a guy on the IRS help line told me how to do it. It’s no big deal, though you need to make sure you aren’t late on payments, or you’ll get a scary letter.
FYI: I’m not a tax adviser, etc.
File NOW! Figure out how to pay later. There are many options available for paying. The important thing is just to file on time.
Your friend must file for an extension of time past the due date of 15 April. Simple as that. Tell him to go to the post office and get an extension form and get it to the IRS pronto.
Income tax returns aren’t due until April 17 this year and it’s April 18 in some states in the Northeast. There’s another thread about this.
That said, get started on this now. Get the forms you need from the IRS website. You will find those much faster than trying to dig them out of some government office.
The automatic extension is an extension of time to file, not of time to pay. When you file the extension, you still are supposed to send a payment.
Pay what you can by April 17. Make sure you file by April 17. The IRS will help you figure out the rest.
Very few, if no, post offices stock tax forms anymore.
But lots of libraries have a notebook of forms suitable for copying.
(Which is actually a nuisance to them, as a surprising number of people expect to be able to copy the forms for free.)
Are these federal taxes in the USA? Does your friend have access to a computer? He should start with the I.R.S. FAQ:
Filing Late Returns - Frequently Asked Questions
I’m not a tax expert, but in general local, state and federal governments are not going to immediately repossess your iPod and car or throw you in jail if you can’t pay right away. They will send you a couple of dunning notices and tack on late fees. Check with the relevant tax authority to see what the late fees are.
Which is why I recommend that you try to getting the forms off the web. It’s a lot simpler. And some of them you can even fill out the pdf forms online and then print them out in completed form.
I wouldn’t recommend doing this though unless you know the computer is secure. I wouldn’t pop down to your local wi-fi enabled coffee shop with your W-2s and start typing away.
Actually 17 April 2006 for 2005 tax liability.
As I understand the current form situation, the USPS does NOT have any IRS forms.
If your public library does not then download any current form from the IRS web site.
Not a terribly unreasonable expectation - not all that long ago, libraries would have boxes of free forms.
Of course now, most people that went to the library to get forms are elegible for free on-line filing.
Just so you hear it one more time: he should file on time; pay what he can (or pay nothing), but include a letter asking to start up a payment plan, with a suggested monthly amount that he’d better be able to pay. They’ll accept that and he’ll get paperwork several weeks later, with some modest penalty fees tacked on. I did this several years ago and took six months to pay it off. (Then I started a grand plan to ensure that this never happened again.)
I was laid off last July and I still have no job. And ZERO income really sucks, by the way. However, I owe over $500 between state and federal taxes on my returns.
So, just to be clear, if I were to simply file my returns normally without enclosing any money (because I have NONE), it will be OK as long as I enclose a letter telling them my situation?
Incidentally, I can’t suggest an amount that I could pay, at least not until I get a job.
No it will not be okay. But it will be better than not filing at all. If you don’t pay by April 17, you will be charged a penalty for paying late. This penalty is based on the amount you owe. Since you owe less than $500 in US taxes, the penalty won’t be huge. You’ll also be charged interest on the amount outstanding. I have no idea how your state handles income taxes.
The truth is, this really isn’t so bad. Pay when you get the money. The interest and penalties will continue to mount. They will call. Return that call. Discuss the problem. Mail a letter describing your financial problems. Mail 'em ten bucks if you can.
Just a suggestion: Don’t accept the installment plan. To set up the plan, they charge $40 or whatever. The penalties and interest, however, don’t go away. In my experience, the only advantage to the installment plan is that they add $40 to the amount you owe. If you don’t take the plan, you still send in what you can when you can, but you don’t get the $40 charge. That’s just my experience – your experience may vary.