What Should You Do If You Can’t Pay Your Taxes? - CPA Clinics
Don’t panic! Here are some ideas for getting your tax bill paid and minimizing interest and penalties.
File your tax return on time. Individual income taxes are due and payable in full on April 15. If you expect to owe, you may be tempted to postpone filing until you have the money or decide not to file the return at all.
Pay as much as you can with your tax return. Even if you can’t pay the entire amount, pay as much as possible when you file your tax return.
Consider getting a loan or using your credit card to pay your tax balance in full. The interest rate and fees charged by a lender or credit card company might be lower than the interest and penalties the IRS can charge you.
Ask the IRS for more time to pay. The IRS may grant you a short additional period (60–120 days) to pay your taxes in full. Interest and penalty accrue on the unpaid amount.
Request an extension of time to pay by filing Form 9465, Installment Agreement Request. You may attach Form 9465 to your tax return or file it by itself. Don’t file Form 9465 if you can pay your entire balance due within 120 days or if you request an Online Payment Agreement.
*For taxpayers with AGIs at or below 250% of the federal poverty level, the IRS will waive or reimburse user fees if certain conditions are met.
Request an extension of time to pay using the IRS Online Payment Agreement application at www.irs.gov
Instead of filing Form 9465, you may set up an installment agreement online. The terms of the IRS Online Payment Agreement are similar to the terms for Form 9465. You are eligible to apply online if:
Keep your installment agreement.
There may be a reinstatement fee if your plan goes into default. If you receive a notice of intent to terminate your installment agreement, contact the IRS immediately. Generally, the IRS will not take enforced collection actions:
Consider making an offer in compromise. After you have considered all payment options, you may find that you cannot pay your tax debt or that doing so will create financial hardship.
— Your true ability to pay,
— Your income and expenses, and
— Your equity in your assets.
Generally, the IRS will not accept an offer if you can pay your tax debt in full with an installment agreement or lump sum payment.
— Complete Form 656, Offer in Compromise,
— Complete Form 433-A (OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals, or Form 433-B (OIC), Collection Information Statement of Businesses,
— Submit the nonrefundable $205 application fee, unless low-income certification is met,
— Submit the nonrefundable initial offer payment, unless low-income certification is met, and
— Select a payment option.
* Except individuals meeting the low-income certification guidelines.