Even if you can't afford to pay the taxes that you owe, you must still file your return with the IRS. Failure to do so will result in penalties, fines or worse.
The IRS offers options to those who cannot afford to pay the full amount they owe by the deadline, including options to pay off the taxes owed in installments. That said, these payments will come with interest and there could still be penalties for not having paid on time.
If you cannot pay the full amount of taxes you owe to the Internal Revenue Service (IRS), don't panic. There are several options available for you:
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Payment Plan (Installment Agreement): The IRS allows you to make smaller, more manageable payments over time through a formal installment agreement. This can be set up online if you owe $50,000 or less in combined tax, penalties, and interest.
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Offer in Compromise: Under certain circumstances, the IRS may accept a reduced amount to satisfy your tax liability. This is known as an Offer in Compromise (OIC). However, OICs are not easy to get approved; you must prove that you cannot pay the full amount and that the amount you are offering reasonably reflects the maximum amount the IRS can expect to collect from you.
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Temporary Delay: If you're facing significant financial hardship, the IRS may temporarily delay collection until your financial condition improves. Be aware, though, that during this delay, the IRS will still charge interest and penalties, and may also file a Notice of Federal Tax Lien to protect the government’s interest in your assets.
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Tax Counseling for the Elderly and Low Income Taxpayer Clinics: If you are a senior or a low-income taxpayer who needs help with IRS issues, free tax counseling and representation are available.
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Innocent Spouse Relief: If your spouse or former spouse incorrectly reported or omitted items on your joint tax return, you may be relieved of the responsibility for paying tax, interest, and penalties if you qualify for Innocent Spouse Relief.
Always remember to file your tax return, even if you can't pay your tax bill. The late filing penalty is usually much higher than the late payment penalty. If you're unsure about your situation, it is best to speak with an experienced tax professional like the experts at Peter Witts CPA PC. And remember that interest and penalties can accrue on unpaid taxes, so it's best to address the issue as soon as you can.
I’m Kristin, the PWCPA PC Customer Success Specialist. For more information about this topic, or any other, you can always reach me through our customer ticketing system.