What to Do if You Can’t Pay Your Taxes
Financial life isn’t great for many right now, and tax deadlines are rapidly approaching. If you find that you can’t pay your taxes on time, the Federal Trade Commission can help. Here’s what they suggest:
Read your notices from the IRS or your state comptroller. Ask them about collection alternatives. The IRS has information online about the collection process and payment options, and videos on their YouTube channel. You also can contact the Taxpayer Advocate Service, an independent organization within the IRS that provides free help to people in financial difficulty or who need help resolving a problem with the IRS. Call 1-877-777-4778 or go online.
The FTC also warns you to stay skeptical when looking at companies that provide tax relief. If a company claims you’re eligible to resolve your tax debt (something only the government can do), or charges an advance fee, don’t trust them. The inability to pay your taxes doesn’t put you in a good situation, but if you take the right steps you can at least minimize the resulting issues
There are also multiple methods to make a deal with the IRS if you owe them money and cannot pay it right away:
1) You can setup a payment plan: the IRS will typically, if you owe less than $25,000, allow for a payment plan of up to 5 years. Meaning your minimum payment each month would be determined by the tax plus penalties plus interest divided by 5 years divided by 12 months. This is a great option for those who just got into a bit of trouble this year from a special event. Note that once you have a payment plan in place you cannot be late on paying taxes again.
2) The IRS does offer a program called Offer in Compromise: if you really have no money but have a chunk in savings or can borrow from a friend or family member the IRS may allow you to make a one time payment of less than the total owed to clear your debt. Make sure that you work with a reputable Tax Attorney on something like this!
3) The IRS also can put you into Non-Collectable status. This means that you really have no money, no income, no savings, no assets, no nothing. The IRS will typically send out a letter every 2 years to determine if your situation has changed, but at least this gets you off the radar and stops the calls and threatening letters!
If you need help, we have handled hundreds of these cases and would be happy to help you get your situation straight! 🙂