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Posted on Feb 2, 2009 in Tax Q&A | 0 comments

Filing a Return when You Have No Money to Pay

A lot of people get in trouble with the IRS because they do not file their tax returns on time each year.  One of the most common reasons for not filing your tax returns on time is because you do not have enough money to pay the taxes.  Well, this is a mistake because when you file a return on time you preempt the IRS from tacking on an additional late filing penalty.

One thing you will learn when you are preparing to file an offer in compromise is that all of your tax returns for at least the last six years plus the current year’s tax return must be filed with the IRS.  People usually don’t know what they should do when they prepare their tax returns and they don’t have enough money to pay the tax in full, but when you are filing an offer in compromise with the IRS you are in essence offering to pay them less money for the total tax you owe.  So you will file those returns with the understanding that you won’t be able to pay them and have the intention of filing an offer in compromise to reduce what you owe and have the IRS off of your back forever.