Can't Pay - File Anyway

"File your tax return, and pay what you can now." That's the advice the Internal rEvenue Service provided today for taxpayers who mistakenly believe they cannot file their individual tax returns on time this year because they are unable to pay the amount owed in full with the return.

The IRS said that taxpayers who end up owing more than they can pay either did not have enough taxes withheld from their paycheck or failed to make sufficient quarterly estimated tax payments.

By filing returns timely, even though they can't pay, taxpayers can avoid a severe penalty. The penalty for late filing is five percent of the tax due for each month the return is late not to exceed 25 percent. There is also a minimum late filing penalty of $100 or 100 percent of the unpaid tax for returns that are more than 60 days late, whichever is less.

In fiscal year 1990, the IRS assessed over $882 million in delinquency penalties against 1.9 million individual taxpayers. Most of these penalties, according to the IRS, could have been avoided if these taxpayers had filed their returns timely.

When taxpayers say they are unable to pay the full amount owed, IRS checks financial information to determine their ability to pay. In some financial instances IRS will make arrangements for scheduled part payments. In other cases, IRS will suggest ways for a taxpayer to pay the liability, either by securing a loan from a commercial lender, or by selling property to pay the debt.

The IRS also noted that delinquent taxpayers are sent a copy of Publication 1, "Your Rights As A Taxpayer", along with the first notice of tax due. This publication explains the many rights a taxpayer has at each step in the collection process.

More information is contained in IRS Publication 586A, "The Collection Process". This publication is available from the IRS by calling 1-800-829-3676.

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