What if You Owe Income Taxes and Can’t Afford to Pay?
This morning, I talked about what happens if you file your taxes late. The short version is that you’ll face penalties that are more severe than if you had file your return (or request an extension) on time, but fail to include payment for the amount due.
Okay, but what if you can’t afford to pay the amount due? As it turns out, the IRS allows for what they call an “Installment Agreement,” which is basically a payment plan that lets you pay what’s due in smaller, more manageable increments.
If you owe $25k or less…
If you owe $25k or less, you can us the Online Payment Agreement (OPA) to set up your payment plan. Alternatively, you can use Form 9465. If you’ve already received a bill from the IRS, you also have the option of calling the number on the bill.
If you owe more than $25k…
If you’re in the unfortunate situation of owning more than $25k, you may still qualify for an Installment Agreement, though you might have to fill out Form 433F in addition to using the OPA or filing Form 9465.
Either way, it’s best to pay now…
Even if you set up a payment plan, you’ll still face penalties and interest for your underpayment, so it’s best to pay your taxes when they’re due – if at all possible. But if not, then be sure you jump through the proper hoops to keep yourself out of trouble. You don’t want to anger the IRS.
(More info on Installment Agreements from IRS.gov: link)
Disclaimer: Discover is a paid advertiser of this site.
Reasonable efforts are made to maintain accurate information. See the Discover online credit card application for full terms and conditions on offers and rewards.
Modified on April 18th, 2011 - 4 Comments
Filed under: Taxes
About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!
Related articles...
» States With No Income Tax» Social Security Taxes in 2009
» Our Biggest Income Tax Deductions
» How Are You Preparing Your Taxes?
» Self-Employment, Taxes and SEP-IRAs
» The Social Security Tax Ceiling
» Social Security Taxes in 2010
» Filing an Income Tax Extension
Was this article useful? Please sign up to receive our content via e-mail:
4 Responses to “What if You Owe Income Taxes and Can’t Afford to Pay?”
Leave a Reply
Top Cards by Category
Earn 100 Reward Dollars after you make $1,000 in purchases in the first three months of Cardmembership.
Earn 25K Membership Rewards(R) points after you spend $2,000 during your first three months of Card membership.
Consumer friendly credit card with a great low rate of 7.25% and save on interest charges. No balance transfer fees and no annual fee.
The new Discover it card is out to change the way people think about credit cards. No annual fee. No overlimit fee. No foreign transaction fee & no pay-by-phone fee. No late fee on your first late payment. And Discover won't increase your APR for paying late.*
The new Discover it card is out to change the way people think about credit cards. No annual fee. No overlimit fee. No foreign transaction fee & no pay-by-phone fee. No late fee on your first late payment. And Discover won't increase your APR for paying late.*
Consumer friendly credit card with a great low rate of 7.25% and save on interest charges. No balance transfer fees and no annual fee.
Limited Time Offer: Get 25,000 Membership Rewards(R) points after you spend $5,000 in the first three months of Card membership. Enroll and select a qualifying airline to receive up to $200 annually in statement credits for incidental fees, such as checked bags and in-flight refreshments, charged by the airline.
The new Discover it card is out to change the way people think about credit cards. No annual fee. No overlimit fee. No foreign transaction fee & no pay-by-phone fee. No late fee on your first late payment. And Discover won't increase your APR for paying late.*
- How to Become a Millionaire
- How to Get Out of Debt
- The Best Dollars I've Ever Spent
- How Our Estate Plan is Structured
- How We Paid Our Mortgage In Less than 10 Years
- Money Making Ideas
- How to Manage Your Asset Allocation with Multiple Accounts
- Consumption Smoothing - Save While the Saving's Good
- How to Save on Groceries
- How Much Life Insurance Do You Need?
- Eleven Great Books About Money
- Dave Ramsey is Bad at Math
- Dish Network Customer Service SUCKS
- $8,000 Homebuyer Tax Credit
- Pay Off Mortgage Early or Invest?
- How to Claim the First-Time Homebuyer Tax Credit
- Termite Control: Sentricon vs. Termidor
- How Much Should You Pay a Babysitter?
- Ethanol Blended Gas = Lower Mileage?
- Reduced Credit Limits? Share Your Experience
- $15,000 Homebuyer Tax Credit
- Will Mac OS X Lion Kill Quicken 2007?
- Buying Furniture off the Back of a Truck
How to save money on insurance
- How I cut my spending in half to take a job I loved
- Working longer: Fallback or fallacy?
- More money, more happiness: Do you think money can buy happiness?
- Overdraft fees soared to $32 billion in 2012
- How do you combat prom inflation?
- How should you choose a bank? Look in the mirror.
- The cost of clean water
- College debt 101
- Is it possible to live debt free?
- How to prepare for a home appraisal
October 24th, 2011 at 9:11 am
Well, we just discovered that we are in trouble. When we filed our 2010 taxes on October 15th, we were informed that we owe close to 10K for 2010 and an additional 10K for 2011 in estimated taxes. My wife has a good job, has a 401K, and she owns our house which she acquired before we got married 8 years ago. We file jointly, which may be a mistake.
I work on a 1099 as a commissioned salesman. Over the last eight years, I have always been under contract, however now, for the first time, I am without a contract, the equivalent of being unemployed.
My wife nets around 5K per month and our monthly nut is around 7K. This amount includes paying slightly more than the minimum payments due on credit card debt that we have amassed as a result of trying to survive in this recession. Total credit card debt is app. 100K. Included also is a monthly payment of close to 800 dollars which goes to pay back an existing loan on my wife’s 401K.
Obviously, we are under water. However our apartment is worth about 500K and we are carrying an adjustable rate mortgage on 250K (interest rate is ridiculously low)with a monthly payment of around $500.
I am toying with the idea of calling the IRS to set up a payment plan. I am thinking of offering $500 dollars per month, however the rules seem to indicate that you have to file all taxes before you set up a plan. Since we haven’t filed for 2011, how do we get the estimated taxes included in the payment plan? Are we better off to request temporary noncollectable status, or will the IRS insist that we sell our home and/or liquidate my wife’s 401K in lieu of setting up a payment plan? Personally, I have no assets at all.
This is so depressing!
February 15th, 2012 at 12:47 pm
I lost my job and my sister did too. My sisters house was foreclosed on..so after I lost my job..I used my 401 to buy us a house to live in. My unemployment is being redetermined..so no money is coming in. Now I found out I owe $4100.. in income taxes because of the 401..what can I do???? please help
February 15th, 2012 at 1:29 pm
Well, I called the IRS. Believe it or not, they were so helpful! I thought I would start by offering $500 per month, but they suggested $200 per month, which I accepted. They also told me to file 2011 and not make payment, so they could roll the remainder owed for 2010 together with 2011, and make a new agreement. It was really easy, and they were very nice. Just be honest. They know there are a lot of people in trouble.
November 7th, 2012 at 10:20 am
This post will assist the internet users for setting up new website or even
a blog from start to end.