3 Things to Do if You Can’t Pay a Large Tax Bill

If you’re one of the unlucky taxpayers who got hit with a large tax bill, you’re probably trying to figure out how to pay. Fortunately, you do have some options. Here are a few tips on what to do if you can’t pay your bill.

Don’t ignore the bill. Whatever you do, don’t ignore your tax bill. The Internal Revenue Service will find ways to get their money. For example, they can garnish your wages. Another important reason not to ignore your bill is the possibility that the amount due is incorrect. If you discover an error, immediately call the number on your bill, send a letter to the IRS office that sent the bill, or visit your nearest IRS office.

Request an installment agreement. An installment agreement allows you to pay a debt over a period of time. If you owe the IRS less than $25,000, you can apply for an installment agreement online via their Online Payment Agreement or call the number printed on your bill. If you owe more than $25,000, you might still qualify, but you’ll most likely have to fill out Collection Information Statement, Form 433F. You’ll also have to fill out the Request for Installment Agreement (Form 9465) and mail it to the address printed on the bill or notice.

Request an Offer in Compromise. If your bill is absolutely beyond what you can afford to pay, the IRS might agree to arrange an Offer In Compromise. This means that the IRS will agree to accept less than the amount due. The only catch is, you cannot have any assets, such as equity or retirement accounts, or any means of obtaining enough income to pay the bill. However, do know that this arrangement could cost you a lot of money (in the thousands) in CPA fees. Negotiating an Offer in Compromise could take more than a year.

For more tax tips, see:

11 Last Minute Tax Tips