If you owe taxes to the IRS and you are unable to pay, it can be a stressful and overwhelming situation. However, it’s important to understand that there are options available to you.
File Your Tax Return on Time
First and foremost, it’s important to file your tax return on time, even if you can’t pay the full amount of taxes owed. This is because the failure-to-file penalty is much higher than the failure-to-pay penalty. If you don’t file your tax return on time, you will be subject to a penalty of 5% of the unpaid taxes for each month your return is late, up to a maximum of 25%. In contrast, the failure-to-pay penalty is only 0.5% of the unpaid taxes per month.
By filing your tax return on time, you can avoid the failure-to-file penalty and reduce the amount of penalties and interest you will owe in the long run.
Explore Payment Options
If you can’t pay the full amount of taxes owed, the IRS offers several payment options to help you resolve your tax debt. These options include:
Installment Agreement: This is a payment plan that allows you to pay your tax debt in monthly installments. You can apply for an installment agreement online or by mail using Form 9465. Depending on the amount owed, you may need to provide financial information to the IRS to qualify for an installment agreement.
Offer in Compromise: This is a settlement option that allows you to settle your tax debt for less than the full amount owed. To be eligible for an offer in compromise, you must demonstrate that you are unable to pay the full amount owed and that paying the full amount would cause financial hardship.
Temporary Delay: If you are unable to pay your tax debt due to a temporary financial hardship, you may be eligible for a temporary delay of the collection process. This will give you time to get back on your feet financially before the IRS resumes collection activity.
Currently Not Collectible: If you are unable to pay your tax debt and your financial situation is unlikely to improve in the near future, you may be eligible for a Currently Not Collectible status. This will temporarily suspend collection activity until your financial situation improves.
Consider Hiring a Tax Professional
Dealing with the IRS can be complicated and stressful, especially if you owe a significant amount of taxes. Hiring a tax professional can help you navigate the complex tax system and negotiate with the IRS on your behalf. A tax professional can also help you determine which payment option is best for your specific situation.
Stay in Communication with the IRS
If you can’t pay your taxes, it’s important to stay in communication with the IRS. Ignoring the problem will only make it worse. If you don’t pay your taxes or make arrangements to pay, the IRS can take collection action against you, such as placing a lien on your property or garnishing your wages.
By staying in communication with the IRS, you can show that you are willing to resolve your tax debt and avoid further collection activity.
If you can’t pay the IRS, it’s important to take action as soon as possible. By filing your tax return on time, exploring payment options, considering hiring a tax professional, and staying in communication with the IRS, you can resolve your tax debt and avoid further collection activity. Remember, the longer you wait to resolve your tax debt, the more penalties and interest you will owe in the long run.
