Can’t pay right away? You can still meet the tax-filing deadline
The tax-return filing deadline is fast approaching, with April 18 now only about a week away.
If you need more time to file, remember you are entitled to an automatic six-month extension. All you have to do to get another six months is request it by submitting Form 4868.
But an extension of time to file does not remove the obligation to pay tax. And so, if you can’t pay, or can’t pay right away, it’s time to consider your options.
One possibility is to borrow money so that you can pay the IRS. Another is to use a credit card. As we noted in a recent post, paying taxes with a credit card can actually help some people improve their credit score.
There are also several options for resolving things with the IRS, including:
Short-term payment plan
If you can’t quite pay the entire amount of your taxes, but are close, the IRS offers up to 120 days to pay in full. This is not a formal payment plan and there is no formal application required.
Monthly payment agreement
Also known as an installment agreement (IA), these agreements set up fixed amounts to be paid each month until the taxes are paid in full. They can go for as long as 60 months.
If you owe less than a certain amount, you can set up the agreement yourself online. Those amounts are $25,000 for businesses and $50,000 for individuals. This is called an online payment agreement.
Offer in compromise
An offer in compromise (OIC) is a means to resolve tax debt for less than the full amount that you owe.
The IRS does not accept all such offers. You should also be aware that if you have filed for bankruptcy, you will not be able to seek an OIC.
Bankruptcy can, however, be an effective means to take care of certain types of tax debt. If you are having severe financial problems, it may also be possible to have the IRS put your account into a status called currently not collectible (CNC).
A knowledgeable tax attorney can help you choose the option that makes the most sense for your particular situation.