Rapidtax.com, What to Do If You Can't Pay Your Taxes

The end of tax filing extensions is quickly approaching. What do you do if you can't pay the amounts you owe? You should still file your return by the due date and pay as much as you can. There are, however, additional steps that might help.

Credit Cards

You can charge your taxes on your American Express, MasterCard, Visa or Discover cards. If you go in this direction, you can use either of the following two sources:

Official Payments Corporation
1-800-2PAY-TAX (1-800-272-9829)
www.officialpayments.com

Link2Gov Corporation
1-888-PAY-1040 (1-888-729-1040)
www.pay1040.com

If a credit card is out of the question, you may be able to pay any remaining balance over time in monthly installments through an installment agreement. If you are completely wiped out and the future looks grim, you may also want to consider getting the tax amount reduced through the Offer in Compromise program.

To apply for an installment payment plan, fill out and attach Form 9465 to the front of your tax return. The IRS has streamlined the approval process if your total taxes (not counting interest, penalties or other additions) do not exceed $25,000 and can be paid off in five years or less. Be sure to show the amount of your proposed monthly payment and the date you wish to make your payment each month. Make absolutely sure you can make the payments.

The IRS charges a $43 fee for setting up an installment agreement. You will also be charged interest plus a late payment penalty on the unpaid taxes. The late payment penalty is usually one-half of one percent per month or part of a month of your unpaid tax. The penalty rate is reduced to one-quarter of one percent for any month an Installment Agreement is in effect if you filed your return by the due date (including extensions). The maximum failure to pay penalty is 25 percent of the tax paid late.

If you do not file your return by the due date (including extensions), you may have to pay a penalty for filing late. The penalty for failing to file and pay timely is usually five percent of the unpaid tax for each month or part of a month that your return is late. The maximum penalty for failure to file and pay on time is 25 percent of your unpaid tax.

In Closing

The IRS wants you in the system, even if you're broke. Whatever you do, file your tax return in a timely manner. Once filed, the IRS will work with you on payment issues. Don't get stressed. Keep in mind that millions of Americans have the same problem.

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