What if I Can’t Pay My Taxes?
If you can’t pay your taxes, don’t worry. You might be able to use an online payment plan. This lets you pay off what you owe over time. You can also set up an installment agreement to make monthly payments to the IRS.
You can still get an installment agreement even if you’ve already filed your taxes. This way, you can pay off the balance you still owe. If you’re struggling financially, the IRS might let you pay less through their Offer in Compromise program.
Setting up an installment agreement costs $43. Late payment penalties are 0.5 percent of what you owe each month. But, this drops to 0.25 percent if you get an installment agreement file on time without a levy notice. The penalty for not filing on time is 5 percent of what you owe monthly. This happens if you don’t file by the deadline.
Understanding Your Tax Payment Options
If you can’t pay your taxes all at once, the IRS has help. They offer short-term and long-term payment plans. It’s important to know about fees and what might happen if you don’t pay on time.
Short-term Payment Plan
If you owe less than $100,000, you might get a short-term payment plan. This plan lasts 120 days or less. You won’t pay a setup fee, but you’ll still owe interest and penalties until you pay off the debt.
Long-term Payment Plan
For debts up to $50,000, you can get a long-term plan. This lets you pay in monthly installments over time. The IRS might charge a setup fee based on your income and how you pay. Fees range from $31 for direct debit to $107 for other methods.
To get an installment agreement, fill out Form 9465. This form helps you suggest a payment amount and schedule that works for you.
Payment Plan Type | Total Owed | Repayment Period | Setup Fee
Short-term | Less than $100,000 | Up to 120 days | None
Long-term | Up to $50,000 | Installments over longer period | $31 – $107
Requesting an Installment Agreement
If you don’t qualify for an online payment plan, you can ask for an installment agreement (IA). You need to send Form 9465, Installment Agreement Request, to the IRS. This form lets you pay your tax balance over time, usually in 72 months or less.
The IRS has a one-time setup fee for installment plans. This fee is between $31 and $225, based on how you pay. There’s also a $89 fee ($43 for low-income taxpayers) to change or end the agreement. Remember, the IRS adds interest and a 0.5% monthly penalty on unpaid taxes.
You can pay with personal checks, bank transfers, credit cards, or EFTPS. Payments are usually due between the first and 28th of each month. You can change your payment plan online, making it easier to manage.
Installment plans stop immediate payments, pause IRS collection actions, and give a six-month break for those in financial trouble. To get an installment agreement, file Form 9465 online, by phone, or by mail, depending on your situation. Check Tax Topic No. 202, Tax Payment Options, for more payment methods.
Not making payment plans with the IRS can lead to more penalties and interest. So, it’s important to deal with your taxes quickly. Look into the ia request and tax payment options that are available to you.
Suspension of the Collection Period
When you ask for an installment agreement (IA) with the IRS, something big happens. The ten-year collection period stops. This pause lasts until your IA is set up, or you cancel or it gets rejected. If your IA request is turned down, the collection period pauses for 30 days.
If you miss your IA payments and the IRS wants to end the agreement, there’s a 30-day pause. The IRS has up to 10 years to collect taxes, penalties, and interest after assessing the tax. This time can change due to certain events or actions.
You can find out when your collection period ends through online sign-ins, Form 4506-T, or a phone call. The end date can be changed by different events or actions, based on laws and rules.
Here are some situations that can pause or extend the 10-year collection period:
- Requesting an installment agreement (IA)
- Filing for bankruptcy
- Submitting an offer in compromise (OIC)
- Seeking a collection due process hearing
- Filing for innocent spouse relief
- Being in a combat zone
- Serving in the military
- Living outside the U.S.
- Substitute for Return filed by the IRS
Levies (taking property) during the suspended period are usually avoided, but not always. You can ask for a refund of any extra money paid after the collection period ends but before the refund deadline.
Knowing about the collection period suspension is key when dealing with tax payments and ia requests. This knowledge helps taxpayers plan better and avoid the bad effects of a long offer in the compromise process.
Filing Your Return on Time
Make sure to file your tax return by the due date, even if you can’t pay everything at once. This avoids a late filing penalty, which can be up to 5% per month. If you pay what you can by the deadline, you might get a lower penalty of 0.25% per month. This is true if the IRS agrees to an installment plan and you don’t get a levy notice. However, it is important to note that failure to file your return or an extension can result in a file penalty, which is equal to 5% of the unpaid balance per month or part of a month, up to a maximum of 25% of unpaid tax. Our tax preparation services can assist you.
Reduced Late Payment Penalty
The penalty for not paying on time starts at 0.5% of the balance due each month, capping at 25% of the owed taxes. But, if you have an IRS installment agreement, the penalty drops to 0.25% per month. You’ll also pay interest at the short-term federal rate plus 3%.
Avoiding Late Filing Penalty
The penalty for not filing on time is 5% of the unpaid balance each month, up to 25% of the unpaid tax. If it’s due to fraud, the penalty jumps to 15% per month. For returns filed over 60 days late, the penalty is at least $210 or 100% of the unpaid tax for 2019 returns.
Penalty Type | Rate | Maximum
Late Filing Penalty | 5% per month | 25% of unpaid tax
Late Filing Penalty (Fraud) | 15% per month | –
Minimum Penalty (>60 days late) | Lesser of $210 or 100% of unpaid tax | –
Late Payment Penalty | 0.5% per month | 25% of back taxes owed
Reduced Late Payment Penalty (with Installment Agreement) | 0.25% per month | –
Offer in Compromise Program
If you can’t pay your full tax debt, you might want to look into an Offer in Compromise (OIC). This lets you settle your tax debt for less than the full amount. You’ll need to send Form 656, Offer in Compromise, and Form 433A, Collection Information Statement, to the IRS. These forms show your financial struggles and why you can’t pay the full amount. Additionally, the OIC program offers a low interest rate of only 3% on payment plans, making it a viable option for taxpayers in need.
The OIC program helps taxpayers settle their tax debt for less. This is if they show they can’t pay the full amount. The IRS looks at your income, expenses, assets, and payment ability to decide if you qualify.
To Apply for an Offer you need professional assistance.
To apply for the OIC program, you must pay a $205 application fee. This fee might not be needed if you’re very low-income. You also need to make an initial payment with your application. This can be a lump sum or paid over time.
OIC Payment Options | Initial Payment | Remaining Balance
Lump Sum | 20% of total offer | Paid in 5 or fewer payments
Periodic Payments | First month’s payment | Paid over 6 to 24 months
The IRS has two years to look over an OIC application. During this time, they won’t bother you about the debt. If they don’t make a decision in two years, your offer is accepted. The IRS looks at if you can pay and other things like if they think you owe the debt.
If you’re applying because you’re in a tough economic spot, you’ll need to explain why. This could be because of your age, job status, health problems, or natural disasters that have made it hard for you to pay.
The Offer in Compromise program is a big help for those who can’t pay their full tax debt. It offers a chance to settle your debt for less than the full amount owed.
What if I can’t pay my taxes by April 15th
Having a tax bill you can’t pay is stressful. But ignoring it isn’t the right move. The IRS can take actions like taking your wages or freezing your bank account if you don’t pay. Luckily, there are ways to deal with your tax debt and avoid more penalties and interest.
One way is to ask for an online payment plan or installment agreement with the IRS. This lets you pay your taxes little by little, often with fewer penalties and interest than if you didn’t pay at all. The IRS might also accept an Offer in Compromise, letting you pay less than the full amount. If you can’t pay your tax bill within six months, consider exploring other options such as a personal loan or using emergency savings. However, be sure to weigh the benefits and risks before making a decision. Ultimately, if you can pay your tax bill within six months with the IRS installment plan, it’s generally the option that will save you the most money in fees and interest.
If you can’t pay your Federal Taxes…
If you can’t pay your taxes, act fast and talk to the IRS. Not paying or ignoring your payment options or levy notice can cause bigger problems, like losing assets or not being able to get a passport. By looking into these options, including requesting a temporary delay in payment due to financial hardship, you can manage your tax debt and move forward.
Tax Payment Option | Key Details
Online Payment Plan | Allows you to pay your taxes over time, often with reduced penalties and interest compared to letting the debt go unpaid.
Installment Agreement | Another option to pay your taxes in manageable monthly installments and avoid more severe collection actions.
Offer in Compromise (OIC) | The IRS may be willing to accept an OIC, allowing you to settle your tax bill for less than the full amount owed.
The important thing is to act and look into your tax payment options. Ignoring it will cause more trouble later. By working with the IRS, you can find a solution that suits your finances and helps you get back on track.
Requesting an Extension to Pay
If you need more time to pay your taxes, the IRS offers an option. You can ask for an extension to pay your tax bill. This gives you up to 120 extra days to get the money together. But you’ll still have to pay interest and penalties during this time.
To ask for an extension, use the IRS’s Online Payment Agreement application on their website. This tool makes it easy to apply for an extension if you owe $50,000 or less in taxes, penalties, and interest.
Remember, an extension to pay doesn’t mean you have more time to file your taxes. It only gives you extra time to pay your tax bill. If you don’t file on time, you could face a penalty of up to 5% of the unpaid tax each month.
If you need more time to both file and pay, you can ask for a six-month extension with IRS Form 4868. This moves the filing deadline to October 15. But you still must pay any estimated taxes by the original April 15 due date.
Understanding how to get an extension to pay your taxes can give you time to gather funds. It helps avoid penalties and interest charges. The key is to talk to the IRS early and use their payment extension programs.
Payment Plans: Installment Agreements
The IRS has different ways to pay taxes, including installment agreements. These let you pay your taxes in monthly bits instead of all at once. Knowing about these agreements can help you pick the best one for your money situation.
Streamlined Agreements
If you owe $50,000 or less in taxes, penalties, and interest, you might get a streamlined agreement. These can be paid back in 72 months. You must agree to pay through direct debit or payroll deduction to qualify.
Complicated Agreements
If you owe more than $50,000 or need more time to pay, you might need a complicated agreement. You’ll need to give the IRS more financial details, like about your assets and job. These agreements are more detailed but can still help if you’re struggling to pay your taxes.
Remember, not paying your agreement can lead to big problems. Missing payments can end your agreement and cause the IRS to take action. Always read the agreement carefully before signing and try to keep up with payments.
Installment Agreement Type | Eligibility Criteria | Repayment Period | Additional Requirements
Streamlined Agreement | Owe $50,000 or less in total taxes, penalties, and interest | Up to 72 months | Direct debit or payroll deduction required
Complicated Agreement | Owe more than $50,000 or require a longer repayment period | Varies | Detailed financial information required
Currently Not Collectible Status: Hardship
If you’re really struggling with money and can’t pay taxes, the IRS might give you “Currently Not Collectible” (CNC) status. This lets the IRS stop trying to collect until you can pay again. It helps you pay for basic needs.
To get CNC status, you must show the IRS that you spend more than you make and don’t have much money. You’ll need to give them things like pay stubs, bills, and proof of expenses.
With CNC status, the IRS won’t take your money or garnish your wages. This break can last from six months to over two years, based on your situation. But the IRS will check on you and might start collecting again if things get better.
CNC status isn’t forever. The IRS can still take your tax refunds if you’re really struggling. They might also put a tax lien on your house if you owe over $10,000 in taxes.
If you’re having trouble paying taxes, the Taxpayer Advocate Service (TAS) and local clinics can help. They can guide you through getting CNC status and look into other ways to ease your tax debt.
Key Statistics | Data
Timeframe for CNC status | 6 months to over 2 years
Minimum tax debt for federal tax lien | $10,000
Uncollectible statute of limitations | 10 years
Household debt in the U.S. (2023) | $17.5 trillion
Credit card balances (2023) | $1.13 trillion
Auto loan balances (2023) | $1.61 trillion
IRS Offer in Compromise (OIC)
The Offer in Compromise (OIC) program helps people who owe taxes but can’t pay all at once. It lets you settle your tax debt for less if you’re really struggling financially. You must show the IRS you can’t pay the full amount.
To apply, you need to send two forms to the IRS: Form 656 and Form 433-A. These forms tell the IRS about your money situation. They include your assets, income, expenses, and where you live.
The IRS looks at each OIC request closely. They consider things like how easily you can sell your assets, your future earnings, and more. They use this info to decide if an OIC is a good idea for you.
Offer in Compromise (OIC) Statistics | Value
Acknowledgment letter for OIC application | Typically sent within 2 to 4 weeks of receipt
Decision on OIC application | On average, made within 4 to 6 months once the account is assigned to a specialist
Acceptance rate of OIC applications | The IRS accepted only 12,711 out of 30,163 offers in 2023, a relatively low acceptance rate
OIC application fee | $205 nonrefundable, which may be waived for low-income applicants
OIC payment options | Lump sum payment within five months or a payment plan within 24 months
The OIC process is complex and takes time. You’ll get a letter within 2 to 4 weeks after applying. Usually, a decision comes in 4 to 6 months, but it can take longer for complex cases.
Thinking about an Offer in Compromise? Make sure to look over the forms carefully. Gather all your financial info. The IRS will check your finances to see if an OIC is right for you.
FAQs
What to do if I can’t pay my taxes?
If you can’t pay taxes, don’t panic. File your taxes on time to avoid penalties. Contact the IRS to discuss payment options like an installment agreement or an offer in compromise. Ignoring taxes can lead to more severe consequences, so it’s crucial to address the issue promptly.
Can I refuse to pay my taxes?
Refusing to pay taxes can lead to severe penalties, including fines, interest charges, and legal action. It is crucial to communicate with the tax authorities if you’re unable to pay on time. Explore options like installment plans or seeking professional advice to resolve the issue.
What are the consequences of not being able to pay your taxes?
Failure to pay taxes can result in penalties, interest on the unpaid amount, and possible legal actions such as liens or levies on your property. It can also lead to a negative impact on your credit score and financial reputation. It’s crucial to communicate with tax authorities to explore payment options.
Are there any options available for individuals who can’t pay their taxes in full?
Yes, individuals who can’t pay taxes in full can explore options like installment agreements, an offer in compromise, or requesting a temporary delay through the IRS. It’s essential to communicate with the IRS to discuss your situation and find a suitable resolution plan for your tax liabilities.
Conclusion
If you can’t pay your taxes, act fast and look into payment options. You might want to ask for an installment agreement with the IRS. You could also try for an Offer in Compromise or a “Currently Not Collectible” status. Working with the IRS can help you avoid extra penalties and interest. It also helps you make a plan to pay off your tax debt.
Late payment or not filing on time can lead to big penalties. But, the IRS has ways to help, like reasonable cause penalty abatement or reduced penalties for some people. Knowing the deadlines, what happens if you miss them, and your rights is key. This helps you make smart choices and deal with your taxes.
The main thing is to talk to the IRS and look at all your payment options. Working towards a solution that suits your finances is important. By dealing with your tax debts early, you can avoid worse problems like liens, wage garnishment, or losing your passport. This way, you can get your tax situation back on track.
Struggling to pay your taxes? Don’t navigate it alone. Contact APC1040 today for expert guidance and assistance in finding the best solution for your tax debt. Let us help you get back on track with the IRS!
