What To Do If You Can’t Pay Your Taxes

It’s scary if you owe taxes and can’t pay them.  Rest assured though, you have no reason to be afraid or panic.  But you shouldn’t delay in doing something about it.

One of the first things to do is file your tax return – even if you can’t pay the amount due.  There are penalties for failure to file a return that are on top of the penalties and interest for failure to pay the tax due.  At least mitigate the failure to file penalties by filing the tax return.  If you don’t pay the tax due, the IRS will send you a tax bill.   Also, pay as much as you can of the tax owed..  This will reduce the amount of interest and penalties assessed against you for not paying the entire tax bill.

Another option is to consider paying your taxes via credit card.  The IRS now accepts Visa, MasterCard, Discover and American Express.  The IRS does not charge a fee for paying by credit card, but the credit card companies add an additional convenience fee to the charge.  If the bill is large it’s also a good idea to call your credit card company and let them know you’ll be making a substantial charge  to the credit balance.

The IRS also allows taxpayers to request a short additional time to pay your tax.  This can be accomplished through the IRS Online Payment Agreement.  If the request is granted you will receive an additional 60 to 120 days to pay the tax in full.  In addition, the penalties and interest assessed for this late payment will be less than other alternatives.

Installment agreements are yet another way to pay your tax.  For total amounts due (which include taxes, interest and penalties) of less than $25,000 the installment agreement can be completed online and you’ll receive immediate approval as well as the monthly payment amount.   When the total amount due is greater than $25,000 you will be required to provide a personal financial statement which the IRS will use to determine the appropriate monthly payment.

Finally, you may be able to make an Offer in Compromise (OIC).  With an OIC you’re asking the IRS to settle the tax debt for an amount less than the full amount they say you owe.  The IRS may agree to this if they agree that your tax debt may be inaccurate, you don’t have enough assets and income to pay the tax, or your circumstances are such that paying the tax will create an economic hardship for you.

If you have a tax debt that you cannot pay and need to discuss your options with a tax attorney who can help then schedule your free consultation by calling (480) 888-7111 or submit a web request here.