What If I Can't Pay My Taxes?

If you owe the IRS more than you can pay this year, don't panic. Read on for possible solutions if you can't pay your taxes.

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Key Points

Even if you don't have the money to pay, you should still file your taxes to avoid additional penalties. In most years, federal taxes are due on April 15, unless the date falls on a weekend or holiday or the IRS announces a special extension. The IRS offers payment plans to pay in installments when you owe in taxes, although penalties and interest can usually accrue until your tax is paid.

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Owing more in taxes than you can afford can feel stressful, especially if you weren't expecting it. While millions of people receive refunds each year, millions of others end up owing money instead. If you're in that group, you're not alone, and the good news is that even if you can't pay right away, you still have options to move forward. A good place to start is by filing your taxes on time, even if you're not able to pay the full amount yet.

What Happens If You Don't File Taxes?

Not filing your taxes won't make your tax bill go away. Instead, the IRS can add penalties and interest that grow over time. Even if you can't pay, filing your return helps you avoid larger penalties and keeps more repayment options available.

What Should I do If I Can't Afford My Tax Bill?

If you can't afford your tax bill, you should still file your taxes to avoid penalties. Read on to learn more about your options with the IRS.

1. Set Up a Payment Plan with the IRS

The IRS offers payment plans to make it easier to pay in installments when you owe in taxes, although with both extended plans, you will be responsible for accrued penalties and interest until your balance is paid in full.

You can apply online to get your payment plan started but you can also apply by mail, phone, or in-person. Before you apply, learn more about the payment plans and consider talking them over with a tax specialist or accountant.

Long-Term Payment Plan

The long-term payment plan offers monthly installments to pay off your federal taxes as agreed upon by the IRS. Those who owe $50,000 or less in taxes, penalties, and interest combined and also filed all required returns can apply online. You may have a fee when you apply, but it may be reimbursed if you are eligible for low income status.

Short-Term Payment Plan

With a short-term payment plan, you agree to clear your federal tax payment in 180 days or less. There are currently no setup fees for this type of payment plan when you apply.

2. Request an Offer in Compromise

With an offer in compromise, you may be able to settle what you owe the IRS for a lesser amount. However, this method does require a $205 application fee up front that may be reimbursed based on your finances. The IRS determines eligibility based on:

• Ability to pay
• Income
• Expenses
• Asset equity

See if you are eligible for an offer in compromise at the IRS' pre-qualifier.

3. Temporary Collection Delay (Currently Not Collectible) Status

If you're unable to pay your tax debt due to financial hardship, the IRS may place your account in Currently Not Collectible status. This temporarily pauses collection efforts, such as levies or garnishments, although interest and penalties may continue to accrue.

4. Penalty Relief Programs

The IRS offers penalty relief in certain situations, such as reasonable cause (e.g., illness or natural disaster) or first-time penalty abatement. If approved, this can reduce or remove some of the penalties added to your tax balance.

What Else Can You do When You Can't Pay Taxes?

Although ClearOne Advantage can't help with tax debt, we may be able to assist if you are struggling with credit card debt. Our Certified Debt Specialists are standing by to help you explore your debt relief options and work out a solution customized just for you. Call 888-340-4697 to speak to a Certified Debt Specialist today.

Disclaimer: ClearOne Advantage does not offer tax advice. Please consult with your accountant or tax professional for advice regarding your specific tax situation.