What to do if You Can’t Pay Your Tax Bill

What to do if You Can’t Pay Your Tax Bill

So many Americans love tax season because it means a nice heavy chunk of change, the IRS refund.  They file their taxes the minute tax season opens, and a few weeks later that nice refund shows up in their bank accounts.  It’s a great incentive to file!

Not Everyone Gets an IRS Refund

But for others, tax time means time to pay up.  You see, not everyone gets a refund from the IRS after filing a federal income tax return. Some owe money, for whatever reason.  You may owe the IRS money after doing your taxes if you didn’t have enough withheld from your paychecks, or if you received income that wasn’t anticipated, so you hadn’t made any estimated payments.

What happens if you can’t pay your tax bill?  If you simply don’t have the money, the IRS has a few solutions for you.  Depending on how much you owe and how soon you’ll be able to pay the bill, choose from an IRS installment agreement or call them to request to pay in full.

If you think you can pay your tax bill within 120 days, call 1-800-829-1040 to talk to the IRS.  But if you need more time, fill out IRS form 9465 and submit it to the IRS.  You can also apply online here  for a payment agreement.

Form 9465

If you meet certain requirements, you can’t be denied an IRS installment agreement.  Here they are:

  1. you owe less than $10,000
  2. you’ve filed and paid your federal taxes for the past 5 years
  3. you have no previous installment agreements with the IRS
  4. the IRS agrees you just can’t pay, and you provide all the proof they ask for
  5. you say you’ll pay within 3 years

The Downside of Using IRS Form 9465

There is a fee that goes along with form 9465.  It’s $105.  If you agree to have the money taken out of your bank account electronically, the fee is reduced to $52.  Nice!  If you make under a certain amount of income, the IRS will give you a reduced fee of $43.  The IRS will figure this out.  However, if you think you qualify for the reduce rate and they didn’t give it to you, use IRS form 13844 to request it.  The form is called Application For Reduced User Fee For Installment Agreements.

Keep in mind that you also have to file the form on time.  It takes a month for the IRS to process your application for an installment agreement.  It can take even longer if you file your taxes in April, closer to the tax deadline.

Beware: even if you get an installment agreement in place on time and it’s approved, interest charges will still accrue.

Consider Other Cheaper Means of Payment Before Filing Form 9465

Because of the fees and interest involved with Form 9465 and the IRS installment agreement, you should consider getting a loan or using credit cards to pay your tax bill.  Figure out which method is the cheapest.  It won’t necessarily be using an installment agreement.