The most important thing to remember if you cannot pay your income taxes is that you should still file your income tax return. When you file pay as much as you can to reduce penalties and interest. Then you should contact the IRS and let them know that you cannot pay the amount in full and that you need to make alternate payment arrangements. These are the three options that you should consider:
- Ask for additional time to pay. You can get an additional 30 to 120 days to pay without a formal installment agreement. If you can pay in this amount of time you will substantially reduce your penalties and interest.
- You can enter into an installment agreement. You will have to request an installment agreement from the IRS and have it approved. If you owe less than $25,000 this is a relatively simple process. If you owe more than $25,000 you must complete a financial statement so that the IRS can determine the monthly payment amount.
- You can pay by credit or debit card. You will pay far less paying in this manner than paying penalties and interest to the IRS.