IRS Payment Options if You Cannot Pay Your Taxes

What to do if you Cannot Pay Your Federal Taxes on Time

IRS Form 1120

New For 2009 – A Kinder, Gentler IRS

In 2009 the IRS developed new policies to benefit struggling tax payers meet their tax obligations. These benefits are not automatic -- you must communicate your financial hardship with the IRS. If you are having trouble paying business or personal taxes avoiding the IRS will not help you.

IRS employees now have greater discretion and more flexibility in exercising options when working with tax payers including making payment adjustments for back taxes owed.

In response to difficult economic times the IRS is now trying to assist more tax payers in crisis to keep them out of collections. But in order to get leniency you must contact the IRS if you are having trouble paying your taxes.

The IRS still wants to collect taxes from you but if you can claim financial hardship you may find the IRS more receptive to alternative solutions than it has been in the past.

Reasons for Financial Hardship

You may be able to get help from the IRS if you meet any of the following conditions for “financial hardship:”

  • Have lost your job;
  • Are dependent on Welfare or Social Security;
  • Have excessively high medical bills; or
  • Are facing a devastating illness.

Ways the IRS Can Help Taxpayers Avoid Collections

There are many ways that the IRS may be willing to assist you but even if you cannot pay your taxes on time you must still file by the April deadline.

The IRS offers a comprehensive list of “What if” scenarios including losing a job, reduction in income, and other factors that could make paying taxes even harder this year.

Call the IRS at 1-800-829-1040 to discuss your situation but visit the IRS website before calling so that you understand what options might be available to you, including:

  • A short-term extension to pay,
  • Negotiating a new or existing installment agreement or an offer in compromise; or
  • Additional review process for Offers in Compromise on home values;
  • Options for the prevention of Offer in Compromise defaults;
  • Expedited Levy Releases; or
  • A waiver on interest charges which accrue on unpaid tax bills.

Two Options to Ask For if You Are Behind in Payments

If you are already paying on taxes owed but are having trouble meeting your payments:
  1. Ask the IRS to Stop Collection Proceedings: If you meet the criteria for financial hardship the IRS may be willing to postpone aggressive collections if you cannot pay your taxes.
  2. Renegotiate Installment Agreement Payments: If you have a good track record for making payments on an existing Installment Agreement but are now experiencing qualifying financial hardship you can ask the IRS for more affordable monthly payments or to skip a payment.

    The IRS can exercise its right to sole discretion in determining if you are in financial hardship and in deciding what options they will extend to you. To get the best tax payment options and terms for you or your business be honest, file your returns on time, and communicate on a timely basis with the IRS.

    For more information about the IRS and tax payments: