What to do when you can’t pay your taxes
So you went through the long and monotonous process of filling out your tax forms. You look at that final number and about have a heart attack; you can’t possibly pay that much to the Internal Revenue Service. But there is no need to panic. While the IRS may seem insensitive, they will work with you based on your specific situation. Here are three of your best options to work with the IRS.
File an extension
Any taxpayer who can’t pay their taxes at the moment can ask for additional time to pay without penalty. You will need to fill out Form 1227 Application for Extension of Time for Payment of Tax Due to Undue Hardship, along with waiting for approval. However, given the economic crisis that we are in today, the likelihood of your extension being granted is high. If you have a legitimate excuse as to why you can’t pay your taxes, it is definitely worth your time and energy to apply for extension.
Payment Plan
The IRS will most likely approve an installment, payment plan agreement. All you need to do is file Form 9465 Request for Installment Agreement. If your taxes are less than $25,000, you could potentially qualify for streamlined acceptance without any other stress or documentation. If you owe more than that, though, the IRS will require documentation of your income, assets, and expenses to figure out how much you can AFFORD to pay every month.
Settle
While settlements with the IRS are a last-resort method to pay your taxes, it is worth the consideration if you have a financial hardship. The IRS has specific settlement options based on whether the tax is truly owed, whether you can pay the tax, and other factors. If you end up qualifying for a settlement, you may ultimately pay less than your balance, interest and penalties.
The most important thing in order to have most of the odds in your favor is to always file your taxes and keep up to date with your financial operations.
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