Options if you can’t pay your taxes

In this current economic environment, you may owe more tax than you can afford to pay.  The good news is that there are plenty of ways to resolve your tax debt.

1/ Make a partial payment

If you can’t pay the tax in full, consider making a partial payment. Doing so will prevent interest & penalties from accumulating. Interest and penalties build up quickly and overtime can exceed the  original tax due.

To make a tax payment electronically:

2/ Ask for an  extension of time to pay (
up to 6 months)

You may consider requesting a short extension of time to pay. For example, you may need more time to cash in assets or arrange for a loan to pay your tax debt.

To apply for an extension of time  to pay -

3/ Request a payment plan (
Installment payment agreement)

Based on your circumstances, the Internal Revenue Service (IRS)  may grant you additional time to pay the tax in full. There are 2 types of plans.  The automatic payment plan when  you have filed all your tax returns in the previous 5 years, you owe less than $10,000 in taxes and you agree to pay the full amount within 3 years. The streamlined installment agreement when you have filed all your tax returns, you owe less than $50,000 in taxes and you agree to pay the full amount within 6 years

To request a payment plan:

4/ Negotiate a lower balance with the IRS (
Offer in Compromise)

If after considering all payment options, you still cannot pay the tax or that doing so will create a financial hardship, you may make an offer to pay less than the amount due.  The amount will be based on what the IRS considers your true ability to pay. Once that amount is paid, the rest of your tax debt is forgiven.

To apply for an Offer in Compromise -

5/ Obtain a delay in the collection of your debt (
Currently-Not-Collectible status)

If after reviewing your financial situation, the IRS determines that your expenses outweigh your income  and  that you don’t have assets that can pay your debt in full, the IRS may delay collecting the amount you owe.

To read more on CNC status -

If you have un-filed returns or tax debts, contact
Karine Bauer EA to assist you in getting back in compliance.  As always, the views contained in this article are not tax or legal advice and are not a substitute for consulting with a tax professional. Karine Bauer, EA is an Enrolled Agent licensed by the Treasury Department with unlimited rights to represent taxpayers before the Internal Revenue Service. She is an experienced tax professional with more than 20 years of international experience.

Bear  in mind the date of this article as tax law evolves over time.

Updated April 11th, 2021