Unable to Pay? Here’s What to do About Your Tax Bill

The squeeze you feel on your wallet might tighten if you’re suddenly hit with a tax bill. Simply put, there are those who just can’t pay. Fortunately, you have a few options. Read below to find the best for your financial situation.

If you can afford payments…

Online Payment Plan

An online payment plan agreement is available for individuals that owe less than $50,000 and businesses that owe less than $25,000. If you’re ineligible, you can still pay in installments
using Form 9465 and Form 433-F.

Installment Plan

An installment plan is great for most – if you owe under $10,000, there is no minimum payment if you pay off in three years or less. You are guaranteed approval of this payment plan.

If you owe $10,000 to $25,000, there is no guarantee that you will be granted a payment plan, but you do not have to provide additional information to apply. You will have 72 months to pay the amount you owe.

If you owe $25,000 to 50,000, additional information is required to evaluate if a payment plan is possible. You will have to report your income and expenses on Form 9465-FS. The minimum payment due each month will be the amount you owe divided by 72, as above.

If you owe $50,000 or more, the IRS will conduct a thorough financial background check via Form 433-A. You will have a unique minimum payment depending on the amount you owe and your circumstances. It is often wise to sell assets to pay down your taxes. Another key tax debt reducer: your tax refund will apply until your debt is paid off.

If you can’t afford payments…

Other Options

If the amount you owe is in between a few thousand and $10,000, but you are in circumstances in which you cannot pay on time, consider an offer in compromise or temporary delay. An offer in compromise is a settlement that allows you to pay less than you actually owe. Apply through a 656-B. A temporary delay is what it sounds like – it gives you an extended period of time to pay, but is not the same as an installment plan. Your taxes are deemed not collectible until your financial situation improves. Proof of financial status is required, and filling out a form in the 433 series, called a Collection Information Statement.

If you can’t afford to pay your tax bill, the IRS will work with you in many ways. Evaluate which route fits your financial situation and other circumstances best.


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