Can’t Pay Your Tax Bill? The IRS Can Help!
Tax Day may have come and gone on, but that doesn’t mean that everyone’s taxes are paid up and settled with the IRS. If you are one of the many individuals who have yet to pay their tax bill, there’s no need to panic. While it’s always best to pay your tax burden in full and on time, there are circumstances where you may owe more than you have in your bank account. Fortunately, the IRS offers several options to help taxpayers meet their obligations. Here’s what you need to know about IRS payment plans and how you can pay your outstanding tax obligations.
Online Payment Plan Options
Most individual taxpayers qualify for a payment plan. The quickest and easiest way to set up a payment plan is through the Online payment agreement. Once the online application is complete, the taxpayer is notified immediately whether their plan is approved. There’s no paperwork and no need to call, write or visit the IRS.
Generally, the IRS will allow you to set up a streamlined payment plan with no lien filed under the following conditions:
- You owe $50,000 or less
- You demonstrate you can’t pay the amount you owe now
- You can pay off the taxes owed in three years or less
There are essentially four payment plans available:
- Short-term payment plan — The total balance owed is less than $100,000 in combined tax, penalties and interest. This gives a taxpayer up to 180 days to pay their balance in full.
- Long-term payment plan — The new simple payment plan criteria makes it easier and more accessible to enter a long-term payment plan when the total balance owed is less than $50,000 in combined tax, penalties and interest. Taxpayers may pay in monthly payments for up to the collection statute, usually 10 years. Payments may be set up using direct debit (automatic bank withdrawal), which eliminates the need to send in a payment each month, saves postage costs and reduces the chance of default. Taxpayers should remember that extending the time to pay will increase the applicable interest, penalties and fees.
Other Payment Plan Options
If you cannot qualify for an online payment plan, there are other options available to you:
- Offer in compromise — Some taxpayers qualify to settle their tax liabilities for less than the total amount owed by submitting an Offer in Compromise. Taxpayers should use the Offer in Compromise Pre-Qualifier tool to see if they qualify.
- Temporary delay of collection — Taxpayers can contact the IRS to request a temporary delay of the collection process. If the IRS determines that the taxpayer is unable to pay, it may delay collection until the taxpayer’s financial condition improves. Penalties and interest continue to accrue until the full amount is paid.
Remember, the IRS will never call, text or contact anyone via social media to demand your tax payment. The agency typically contacts taxpayers by mail with a bill, letter or notice explaining what they owe and how to question or appeal any amount due.
Owing the IRS is a scary prospect. But there are ways to lower your tax burden or possibly have penalties waived. If you find yourself in a situation where you owe the IRS, consult with an experienced attorney for advice and guidance.
Allison Soares is a partner and tax attorney at Vanst Law LLP. It doesn’t matter the issue: audits, collections, appeals, international disclosures, grumpy people— Allison enjoys fixing problems. In addition to her legal work, she has worked in accounting and utilizes that knowledge to her advantage while handling cases involving EDD audits from San Francisco to San Diego.
