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What If I Can’t Pay My Taxes

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What If I Can’t Pay My Taxes?

 

You are not alone, in fact, about 5 million taxpayers each year need a payment alternative.  These people are much like you, wondering about your options. Owing and not being able to pay is a bit scary, but it’s only a problem if you don’t take action. If you have to pay your taxes late or if you can’t pay your taxes, you might still be able to work out something with the IRS. The four alternatives when you can afford to pay are:

  • An extension to pay: You can ask the IRS for an extension to pay for up to 120 days by using Form 1127.
  • Installment Agreement/Payment Plan: If it doing to take more than 120 days to pay it off, you may be wondering, “Do I have to pay my taxes all at once?” The answer is no.  With a payment plan, you can spread out your IRS payments. There are several types of payment plans (e.g. installment agreements), depending on your circumstances. They range from simple, streamlined agreements that can be set up online.  The more complicated negotiated installment agreements require you to submit documents showing your financial status.  They typically also allow more time to pay.
  • Currently not collectible status: If you currently in a financial hardship – meaning you can’t pay the IRS anything right now – the IRS will consider a “Currently Not Collectible Status until your circumstances have changed.
  • Offer in compromise (OIC): This is a settlement of your unpaid taxes for less than the full amount owed.  You must qualify to be able to file an Offer in Compromise.  The disposable income and the equity in assets (include retirement accounts and property) will determine the potential offer amount.  They is a good option if you have few or no assets and have trouble paying their necessary living expenses.

Whatever you do, don’t just ignore the taxes you owe. If you don’t make arrangements with the IRS, the IRS will move to collect the debt.  This could mean a Wage Garnishment, were the IRS take the majority of your paycheck, leaving you unable to pay your bills. They IRS could also empty your bank account with a Bank Levy, causing your outstanding checks to bounce. The IRS can also issue a Federal Tax Liens that can destroy your credit and make it hard to sell property or obtain a loan.

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