If you can’t pay the taxes you owe, don’t just ignore the IRS. Instead consider your options.
The IRS offers a number of plans for those that can’t pay. These plans include: long and short-term payment plans, temporary collection delays for those experiencing financial hardships, and Offers In Compromise for those who can’t afford to pay the full amount in the foreseeable future.
Payment plans are known as Installment Agreements and will automatically be accepted by the IRS for amounts of $25,000 or less with payment periods of up to 24 months. Amounts greater than $25,000 and/or longer than 24 months will require you to supply additional information about assets, liabilities and current income but are also available for those that just can’t pay. You can file a request for an installment agreement on the IRS website or by filing IRS form 9465.
Just need more time? You may be eligible for a Temporary Delay or even a suspension of collections if you can’t pay because of lack of assets and income (due to a financial hardship like a job loss or medical condition). You can make a request for a Temporary Delay by calling the number on the IRS collection notice you will receive. If you need a temporary delay you will need to provide the information on IRS form 433A.
An Offer In Compromise allows qualifying taxpayers to settle their taxes due for less that the full amount owed, based on the quick sale value of their assets and income less allowable living expenses. This option can be complex and it will not work for taxpayers with assets, income or future income prospects. The final amount they IRS will accept is based on the present value of what the IRS could expect to collect from you over 5 years. It also requires all tax returns to be filed to date before submission and for you to stay current in tax filing and payment for a period of 5 year after the date of acceptance. If you violate these rules the IRS can reassess any tax forgiven. This option requires careful evaluation and may require the assistance of a tax professional.
The IRS knows that financial difficulties can arise, and these programs exist to assist those who need help so they can get back in compliance. But when tax liabilities are ignored, the IRS also has the means to take swift and decisive action to collect what is owed. They can seize assets, garnish wages and levy bank accounts. So be sure not to ignore IRS notice and unpaid taxes.