#estimatedtaxfail

Face the reality—and the error—of your ways. While it might be tempting to hope that your #EstimatedTaxFail goes undetected or just blows over, it’s best to acknowledge the reality that it won’t. Be proactive and acknowledge your mistake. Doing so will not only prove that you’ve got this adulting thing down cold, but it will also make the IRS (a little) more forgiving (maybe).

Still living in a past tax year? Get current on filing your tax returns. Sure, sometimes it’s fun to relive the past, but not when it involves your unpaid taxes. If you haven’t paid your estimated taxes for a few years, it’s time to get busy and prepare to file taxes not only for the current year but as far back as the previous six years. This will require collecting and organizing all of your available records, including 1099s, receipts, invoices, and other relevant documentation, then completing past due tax returns, one by one.

Prepare to pay the piper—a.k.a. Uncle Sam. To this point, all your #EstimatedTaxFail has cost you is a little bit of time and maybe a trifle of aggravation…here’s the part that is likely to hurt the most: you need to catch up on your current year estimated tax payments as quickly as possible. Taking swift action to pay your tax bill will not only reduce any penalties or fines that may be levied on previous year delinquencies, it will also send a signal to the IRS that moving forward, you intend to be compliant with making the required quarterly tax payments.

Take action to reduce penalties. If your #EstimatedTaxFail extends back a few years, then you’ll need to take care of any late filing and payment penalties that you’ve racked up. If there were extenuating circumstances which contributed to your lapse in tax payments (i.e. Reasonable cause which, according to the IRS, exists when a taxpayer demonstrates that he or she exercised ordinary business care and prudence in determining the tax obligation, but nevertheless failed to comply), you may be able to ask for a penalty abatement. In order to obtain abatement, you must make a sound argument for reducing penalties. A special note for first-timers! You may be granted a first-time (and one-time) penalty abatement waiver if you only failed to file taxes this past year and if you have a past history of compliant behavior.

Create a plan to pay back taxes. Once you determine how to handle late payment penalties and non-filing fees, you need to plan how you are going to pay the IRS the tax money you owe. If you can’t pay it upfront, you can ask the IRS to make other arrangements based on your documented ability to pay. While the IRS may seem totally unforgiving in the face of an #EstimatedTaxFail, the agency would rather work out a payment plan with you than be out of pocket altogether. So if you’re willing to work out a plan, chances are, they will be, too.

There’s no doubt that sooner or later an #EstimatedTaxFail will get you noticed by the IRS. That’s why it’s best to own the situation and take action to correct your delinquent tax payments as soon as possible. If you have several years of back taxes to pay and your tax situation is beyond what you can handle on your own, working with an experienced CPA can help alleviate the stress that often comes with those notifications from the IRS.