To say the least, local, state, and federal governments tend to be somewhat adamant that you pay your taxes. However, you may be surprised to know that you do have a few options that you may want to take advantage of. You should remember that some of these options may involve penalties of some sort, but your goal can be to delay payments as long as possible, allowing you to conserve precious cash. Some ideas for dealing with taxes are:
Real Estate Taxes
Real estate taxes are generally paid twice per year. If you are lucky and the timing of your layoff is right, you may not have to worry about real estate taxes for several months. If your taxes are due soon, though, you'll have to come up with an appropriate plan. Because eviction and auction sales are difficult legal processes that can be expensive and time-consuming, county governments tend to avoid them at all costs. Some counties don't even consider your real estate taxes delinquent until you have gone one year without paying a tax bill. After that, it can take up to a year for you to be placed on a list of properties considered delinquent before the legal maneuverings involved in an auction sale can even begin. The bottom line on real estate taxes is that it is highly unlikely that you will be out of work long enough to make you delinquent on your real estate taxes.
On the other hand, you shouldn't take this situation as an invitation to disregard your real estate tax bill. As with any other obligation, you should contact the real estate tax office in your area, explain your situation, and work out a payment plan. Again, because the government would rather avoid auction sales at all costs, you'll likely find that they are more than willing to work with you.
Income Tax
There are two concerns with income taxes that you need to be aware of if you are unemployed. The first is that unemployment compensation may be taxable. Because the unemployment office will not withhold federal or state taxes from your compensation, you need to be aware of any possible tax liabilities. In general, you will need to file a quarterly estimated tax form (and pay any taxes due) for your unemployment compensation if you meet certain criteria. In other words, if your income for the year is above a certain level, your unemployment benefits will be taxable and you will have to pay quarterly taxes to avoid penalties. The IRS suggests that you contact them to discuss your situation and determine if you must file quarterly taxes. Your best bet in this situation is to contact the IRS or state government to determine what, if anything, you should be paying on a quarterly estimated basis. Given the fact that unemployment compensation is generally fairly low, the taxes you owe will not likely be exorbitant, and you should pay them right away to avoid penalties later.
The second important concern about income taxes is likely to cause you more problems. If you are unemployed around April 15 and you owe a significant amount of income taxes, you may not have the money to pay them right now. Because the IRS tends to be a stickler when it comes to you owing them money, this can be a delicate situation. According to the IRS information line, the worst thing you can do is ignore the April 15 deadline altogether. You should prepare your tax form as accurately as possible and calculate the amount of tax you currently owe. Do the same for state taxes. You should file your return on time, paying all that you can possibly afford to pay, and you will automatically begin paying interest and penalties on the amount you still owe. However, in the words of one IRS telephone assistor, they will not "take your firstborn or your car or something." Instead, you will be notified that you are delinquent and that you now owe the balance plus interest and penalties. When you receive this notice, you may want to call the IRS, explain your situation, and ask to work out a payment plan. It's not the IRS's policy to devise payment plans for taxpayers. However, they're more likely to resort to some type of plan than to try to repossess your car if they think they can get the money faster.
Whatever your situation, if you have questions, find someone who can help. Use the IRS toll-free number (1-800-829-1040) to call and get more information. Talk to friends or family members who may have experienced similar problems. Ask around at your church, community group, or professional organization to see if anyone has expertise in preparing tax returns. Above all else, try to work within the government s regulations whenever possible. Don't simply ignore deadlines. As with any debt, your cooperation will go a long way toward easing the situation for you.
