What If I Cannot Pay My Tax?
If you cannot pay the balance due with the return, FILE IT ON TIME anyway, paying whatever you can with the return. This prevents the late filing penalty, which is ten times that of the late payment penalty. You will be billed for the tax and related interest and penalties.
Per Fortune Magazine, late filers face fees equal to 5% of their unpaid tax bill. That’s charged for each month or part of a month the return is late. If you will be unable to pay the remaining balance due within a reasonable period-of-time after filing, you may choose to apply for an Installment Agreement, using Form 9465. This method requires that you indicate how much you can pay per month, and what date of the month the payments will be made. There is a user fee of $105 for such an agreement, which will be billed by the IRS with your first installment due.
NOTE: If you are on an installment agreement, be sure that your CURRENT year taxes are being paid on time. If you end up owing money you cannot pay for the current year, your previous year installment agreement may be voided.
Previous FAQ: How do ‘Offers in Compromise’ work?