If you find that you can't pay the full amount before the filing deadline, you should file your return and pay as much as possible before the due date. To see if you qualify for an installment plan, attach Form 9465, “Request for an Installment Agreement,” to the beginning of your tax return. If you can't pay the full amount of taxes you owe, you have several options. You can contact the IRS to set up a payment plan that will allow you to make smaller payments over time.
You can also request a compromise offer, which is an agreement between you and the IRS to settle your tax debt for less than the full amount. The most popular option is to request an installment agreement, a long-term monthly payment plan through the IRS, according to Wilson. If you find that you can't pay what you owe, file your return and pay what you can. Then work with the IRS, perhaps with the help of a tax professional, to formulate a plan to pay the balance of your tax bill over time.
If you're considering filing for bankruptcy because you can't pay IRS taxes, you should find out if your tax amount is tax-exempt by talking to a lawyer who specializes in bankruptcy. In some cases, if you have income taxes due that are old enough to be considered a non-priority tax liability, they can be canceled. While this last step is usually reserved for the most serious cases of tax evasion with large outstanding balances, it is best to act with caution. For example, if you expect a customer to make a payment to you, but your taxes are due before that date, you might want to borrow from friends and family.
If you are facing collection action, it's important to contact a tax professional as soon as possible to discuss your options. You're supposed to pay your income taxes gradually throughout the year so that in April you don't owe much or even have the right to a refund of overpaid taxes. If you won't be able to file your tax return before the deadline, you must request an extension to file it by submitting Form 4868 to the IRS before the deadline (usually April 15). It's important to note that filing this form does not give you an extension of the deadline to pay your tax liability.
However, if you don't contact the IRS or make any arrangements to pay your taxes, the agency can take collection action against you. Even if you don't have the funds to pay your outstanding tax liability before the due date, you should file your tax return so you don't incur additional penalties for not filing your return, in addition to penalties and interest for not paying. If that tax debt has made your eyes pop out and your heart race, take a deep breath and enjoy a little zen. Therefore, it's important to work with a tax professional who has a thorough understanding of your state's regulations.
If you can't pay what you owe, the IRS can also work with you to set up a compromise offer that would pay off your debt for less than you owe. A commitment offer is a tax settlement method in which you settle your tax obligations for less than you owe. However, in most cases, taxes take precedence over many other debts when the courts establish their repayment plan.