What To Do When You Can’t Pay Your Taxes

The IRS allows folks who can’t gather the funds to pay their taxes all at once to pay off their outstanding balances over time. You can apply for one of the agency’s two payment programs online. Once your application is complete, you’ll receive immediate notification of whether your payment plan has been approved without having to call or write to the IRS. The IRS notes that online payment plans are processed more quickly than requests submitted with electronically filed tax returns, even if the new tax is not yet assessed. Setup fees may apply, depending on your situation.

Notepad with sign Owe Taxes on a wooden background. Calculator and stack of fifty dollar bills in upper corners of photo.

The two plans are:

  • Short-term payment plan — The payment period is either 90 or 180 days and the total amount owed is less than $100,000 in combined tax, penalties and interest.
  • Long-term payment plan — The payment period is longer than 180 days, paid in monthly installments, and the amount owed is less than $50,000 in combined tax, penalties and interest.

Although filing is not complex, make sure you have the following information on hand before you begin:

  • Your name — exactly as it appears on your most recently filed tax return.
  • A valid email address.
  • Photo identification (driver’s license, state ID, passport).
  • The address from your most recently filed tax return.
  • Your date of birth.
  • Your filing status.
  • Your Social Security number or individual Taxpayer Identification Number.
  • Based on the type of agreement requested, you may also need the balance due amount.
  • Other proof of identity, including a financial account number, a mobile phone registered in your name or an activation code received by postal mail (takes five to 10 business days).
  • The user ID and password you used if you previously registered for an Online Payment Agreement, Get Transcript or any Identity Protection PIN.

 You will need to confirm your identity by providing the information listed above if you haven’t already done so.

If you’re already on a payment plan, you may qualify to use the online payment plan option and revise your existing agreement. Using the Online Payment Agreement tool, you can change:

  • Payment dates.
  • Payment amounts.
  • Banking information for direct debit installment agreements.

Depending on your situation, there may be a fee if you revise an existing payment plan.

Qualified taxpayers and their representatives authorized by a power of attorney can apply for payment plans, including installment agreements, online to pay off balances over time. Your specific tax situation will determine which payment options are available to you. If you’re a sole proprietor or an independent contractor, the IRS counsels applying for a payment plan as an individual.

If you’re not able to come up with the funds to pay your taxes, don’t fret — just take a deep breath and peruse the options for payment plans that are available to you.

Since this is a serious situation, consider getting professional advice. Also, do what you can to make sure this is a one-time event. Was the tax shortfall caused by failure to pay taxes from a series of freelance jobs? Or are you not having enough withheld from your paycheck? A tax professional can advise you so that there are no unpleasant surprises next year.

We welcome the opportunity to put our accounting expertise to work for you. To learn more about how our firm can help advance your success, don’t hesitate to contact Kathy Corcoran at (302) 254-8240.


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