What happens if you owe taxes and can’t afford to pay them all at once?
First, don’t panic and don’t ignore your taxes.
The IRS has several different options available to those who owe taxes.
The easiest option is a payment plan. If you owe less than $50,000 in taxes, you can apply for a payment plan.
A short-term agreement option is available if you can pay the full amount of back taxes within 120 days. This method does not assess a user fee to set up the plan, though you’ll still be responsible for paying penalties and interest.
An installment agreement is for those who opt to pay the owed amount in a time period longer than 120 days. You will be charged a setup fee and are still responsible for interest and penalties
We recommend applying online to set up your payment plan. TL;DR does not offer to set one up for you since we don’t know what you can afford to pay and what your cash situation is.
You will need the following information to apply online:
- Name, exactly as it appears on your most recently filed tax return
- Valid e-mail address
- Address from most recently filed tax return
- Date of birth
- Filing status
- Your Social Security Number or Individual Tax ID Number (ITIN)
- To confirm your identity, you will need:
- financial account number or
- mobile phone registered in your name or
- activation code received by postal mail (takes 5 to 10 business days)
You can avoid similar situations by planning in advance and paying your estimated taxes throughout the year.