What To Do If You Can't Pay Your Tax

From TaxAlmanac, A Free Online Resource for Tax Professionals
Note: You are using this website at your own risk, subject to our Disclaimer and Website Use and Contribution Terms.

From TaxAlmanac

Jump to: navigation, search

This topic will provide options on how to pay your outstanding federal income tax liability. We offer payment options to make full or partial payments towards your tax liability. It is important to still file your tax return even if you cannot immediately full pay the outstanding tax liability.

You can pay your tax liability in full by sending a check or money order, made out to "Treasury Department" in the amount of your outstanding balance and include your social security number. For additional information about Ensuring Proper Credit of Payments, refer to Ensuring Proper Credit of Payments. In addition, you can pay your tax liability by credit card by calling 1 (800) 272-9829 or 1 (888) 729-1040. You can consider financing the full payment of your liability through loans, such as a home equity loan from a financial institution. The unpaid balance is subject to interest that is compounded daily and a monthly late payment penalty. It is in your best interest to pay your tax liability in full as soon as you can to minimize the amount of interest and penalty charged. The interest rate a bank charges is usually lower than the combination of interest and penalties imposed by the Internal Revenue Code. Full payment will stop any further collection notices.

If you cannot pay in full either directly or through the use of loans or credit cards, the IRS offers you partial payment options through short term extension of time to pay and installment agreement. There are three forms of agreements: direct debit from your bank account, payroll deduction from your employer, or routine installment agreement. Your payment amount is based on your ability to pay and should be an amount that can be maintained over the lifetime of the installment agreement. Direct debit or payroll deduction installment agreements provide you with the opportunity to make timely payments automatically and therefore reduce the possibility of defaulting the agreement.

To request an installment agreement, whether you are filing the return or have received a bill, you can submit Form 9465 (PDF), Installment Agreement Request, or your own written request for a payment plan, attached to the front of your return or bill. You should specify the amount you can pay and the day you wish to make your payment each month. The IRS will respond to your request, usually within 30 days, as to whether your request is approved, denied, or if additional information is needed.

If the agreement is approved, a one-time user fee of $43 will be charged and deducted from the first payment. For direct debit installment agreements, you will still need to submit Form 9465 as well as staple a voided check to the form to initiate the automated withdrawal of the payment. To initiate a payroll deduction installment agreement, you need to submit the payroll deduction agreement, Form 2159, which also needs to be completed by your employer. Remember, penalties and interest will be added to the balance due even if an installment agreement is approved.

It is important not to ignore an IRS notice. If you do not make payments or other arrangements to pay the amount you owe in full, we may take collection action which could include the filing a Notice of Federal Tax Lien, serving a Notice of Levy or offset of a tax refund. Refer to The Collection Process for information about "The Collection Process".

If you are unable to make any payment at this time, call 1 (800) 829-1040 to receive assistance. If we determine that you cannot pay any of your tax debt, we may temporarily delay collection until your financial condition improves. In order to assist you, be prepared to provide pertinent financial information from documents you should have available to you during the call, such as current pay stubs, rental agreements or mortgage statements, and car lease/loan statements.

For more information about installment agreements, please see www.irs.gov.

You have rights and protections throughout the collection process. If you would like some printed information on "your rights as a taxpayer," making arrangements to pay your bill, installment agreements, and what happens when you take no action to pay, refer to Publication 594, The IRS Collection Process, and Publication 1, Your Rights as a Taxpayer.

Source: IRS.gov

Personal tools