Key Points to Remember:
Facing a tax bill you can't pay? The critical step is to avoid ignoring the situation. Instead, work with the IRS to establish a payment solution, which could include an extension, a payment plan, or even special hardship programs. Expert guidance can make a significant difference in finding the right approach.
What to Know if You Can’t Pay Your Taxes
Many people encounter a tax bill they can't cover right away. Whether it's taxes owed on your recent return or an older balance, the IRS offers several options based on your financial circumstances:
Extensions for extra time to pay
Installment Agreements (monthly payment plans)
Financial Hardship Programs, like deferred payment status or an Offer in Compromise for qualified cases
An AFS tax professional can help you evaluate these options and coordinate with the IRS to get a manageable agreement in place. The worst option? Ignoring the issue, which can lead to IRS-enforced collections, liens, levies, or wage garnishment.
Steps to Take If You Can’t Pay Your Taxes
1. Verify Your Filing Status and Compliance
To be eligible for any IRS payment arrangement, you must be up-to-date on all required tax filings and have proper withholding or estimated payments for the current year. If you’re unsure about your filing status or have unfiled returns, contact the AFS to review your account. You might also need to adjust your withholding with your employer or make estimated payments if you expect to owe this year.
2. Double-Check the Amount You Owe
Review your returns and the IRS’s calculations to ensure the tax debt is accurate. If discrepancies exist, consider amending your returns. Additionally, explore if penalty relief options apply to reduce or eliminate penalties.
3. Assess Available Payment Solutions
Consider your financial situation, including:
Available assets or income for monthly payments
Potential impacts of tax liens
Penalty and interest costs
Based on this assessment, choose a payment approach that best suits your needs. IRS payment options include:
Short-term Extension for a brief period
Monthly Installment Plans with different terms
Currently Not Collectible Status for temporary hardship relief
Offer in Compromise for qualifying taxpayers to settle for less than the full debt
Gather necessary personal and financial details to support your request with the IRS.
4. Secure an Agreement with the IRS
Contact the IRS promptly to set up your selected payment arrangement, providing all required documentation. Processing times vary, especially if you’re requesting hardship relief, owe more than $50,000, or are applying for a long-term plan or an Offer in Compromise. Be prepared to appeal if your request is denied, based on your situation.
How to Get Professional Help From AFS
An AFS tax expert can guide you in selecting the best option and liaising with the IRS. Set up a consultation to get clarity on your situation and assistance with the IRS process.
For Your Consultation, Bring:
IRS notices regarding tax years and balances owed
Financial records (bank statements, paystubs, receipts for essential expenses) if you’re seeking hardship relief
Contact details of your employer or financial institution if facing a levy
Copies of tax returns for the years with outstanding balances
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