The tax-filing season is over in most states, except in Maine and Massachusetts. Taxpayers that could not pay their tax bill have various options to avoid or reduce penalties and gain back compliance. Those that still need to submit a return can use the IRS efile to quickly and securely file and pay their tax liability. For those who can’t pay their tax bill, here are some tips:
Request an Installment Agreement
Taxpayers that have the financial ability to pay their tax bill in installments may send a request to the IRS for an installment agreement. Under an installment agreement, you agree to pay your full back taxes, including penalties and interest, in monthly installments. The installment amount is based on your current financial ability, and can be modified if there are significant changes in your finances.
To request an Installment Agreement, you may use the Online Payment Agreement if you owe $50,000 or less in back taxes (including penalties and interest). You may also qualify for a short-term Installment Agreement if your total tax debt is under $10,000.
Obtain Additional Time to Pay
If you can pay your full tax bill, including penalties and interest, you may request for additional time to pay if necessary. Use the Online Payment Agreement to obtain an additional 120 days to pay your taxes. Paying in full brings down the penalties and interest drastically, helping taxpayers avoid paying more to the IRS. No fee is charged for obtaining this short extension to pay.
Get Extension of Time to Pay
If paying your tax bill will cause you an undue hardship, then you may qualify for an extension of time to pay. Use Form 1127, Application for Extension of Time for Payment of Tax Due to Undue Hardship to obtain an extension. You are required to include a detailed explanation of the undue hardship.
Explore Other Resolution Options
Other options for resolving unpaid taxes include:
- Offer in Compromise
- Currently Not Collectible
- Innocent Spouse Relief
- Separation of Liability Relief
- Equitable Relief
To determine whether or not you qualify for an alternate resolution option, you may research the terms of eligibility at IRS.gov. Also, you may want to enlist the help of a tax professional in order to determine your best course of action.