What Happens If You Can’t Pay Your Taxes


There are circumstances when you discover that your income taxes are greater than thought and do not have the means to pay it on the due date. If this is the case, you should file your income tax return, even if you cannot pay the exact total amount due. This will prevent you from being fined for failure to file a income tax return. If you can pay any amount on the total due, please do so! It will be to your advantage in many respects. The United States Government, as sufficiently represented by the IRS, is not to be trifled with when it comes to financial issues. Neither is it heartless when you find yourself in jeopardy but is willing to accommodate you if you request assistance. You can ask the IRS to allow you to pay your due taxes by installments in writing or online. You can take up to 60 months to pay your taxes, that is 5 years for some of you in certain parts of America. Please be advised that you will be charged interest on the unpaid balance until it is completely reduced. You will also be charged a late penalty which can be severe if your tax problems stem from fraudulent or frivolous intent. The penalty is ½ of 1% of the unpaid amount of each month’s tax. There are certain situations when it can be as much as 25% of the unpaid balance. The bottom line is that it would be cheaper and less costly if one would take out a bank loan or make a credit card payment to take care of an outstanding tax bill. If you live in Maine, Maryland, Massachusetts, New Hampshire, New York, Vermont or the District of Columbia you can make that credit card payment through:

Official Payments Corporation
1-800-2PAY-TAX (1-800-272-9829)
1-877-754-4413 (Customer Service)
www.officialpayments.com

Link2Gov Corporation
1-888-PAY-1040 (1-888-729-1040)
1-888-658-5465 (Customer Service)
www.PAY1040.com

Please remember to include the pin number and the amount it cost you to pay on your income tax return form. This credit card payment option only is available in those previous mentioned states and if you have American Express, Discover, MasterCard or Visa.

If you cannot use a bank loan or a credit card to pay your late income tax and the installment method to pay the government is your option then please follow the following guidelines. If you want to apply online go to www.irs.com. , use the pull down menu that reads “ I need to …” and select the “Set Up A Payment Plan”. Fill out the application and submit it. If you want to submit an application for an installment plan fill out Form 9465 and mail it to the IRS. Expect a response from the IRS in at least 30 days, if you submit after March 31, you can experience an even longer wait. You can take up to 60 months or five years to pay your back taxes. However, one should pay as much of those back taxes as possible.

The interest on the unpaid balance can be as low as ½ of 1% of the monthly unpaid tax balance. On top of this is the tax penalty which can be as high as 75% of the monthly unpaid tax balance if there is fraud, frivolous mischief, underestimate of tax or non-disclosure of transactions determined in the tax case. However, it is in most cases 5% of the amount due for each month for the tax payback installment. There is also interest on any penalties not paid on the delinquent tax account. This amounts to interest on penalties which can increase one’s debt monstrously. Again it is in one’s best interest to pay one’s taxes on time; or take out a loan!