If you can’t pay your taxes, it’s okay! In fact, most of the taxpayers each year need a payment alternative and leaving them wondering what happens if they make the payment of their taxes late. Let’s take a look at what has to be done if we are not able to make the payment of taxes full to IRS.
If you’ve filed but haven’t paid
If you filed on time but didn’t pay all or some of the taxes you owe by the deadline, you could face interest on the unpaid amount and a failure-to-pay penalty. The failure-to-pay penalty is equal to one half of one percent per month or part of a month, up to a maximum of 25 percent, of the amount still owed. The penalty rate is cut in half — to one quarter of one percent — while a payment plan is in effect.
Interest and penalties add to the total amount you owe. The sooner and the more you pay, even though it’s late, the less you will end up owing.
In addition, you may take advantage of a variety of electronic and other payment options, such as using charge or debit cards to pay your taxes, to make it easier, or apply for a payment plan.
Alternatives for the payment of tax
There are some of the alternatives if you can’t pay tax in full to IRS. The alternatives are as follows:
- An extension to pay- You can ask the IRS for up to 120 days to pay your tax bill.
- Payment Plans- If you’re wondering, “Do I have to pay my taxes all at once?”, the answer is no — with a payment plan, you can spread out your IRS payments. There are several types of payment plans (e.g. installment agreements), depending on your specific situation. They range from simple, streamlined agreements that can be set up online, to more complicated agreements that require you to submit documents showing your financial status.
Online Payment Plans include:
- Short-term Payment Plan- The payment period is 120 days or less and the total amount owed includes combined tax, penalties and interest.
- Long-term Payment Plan- The payment period is longer than 120 days, paid in monthly payments, and the amount owed includes combined tax, penalties and interest.
- Currently not collectible status- If you can prove financial hardship – meaning you can’t pay the IRS right now – the IRS won’t ask you to pay until your circumstances have improved. So, if you can’t pay your taxes,you might not have to pay until you’re able to.
- Offer in compromise (OIC)- This is a settlement of your unpaid taxes for less than the amount you owe – if you qualify. Taxpayers commonly use an OIC when they have few or no assets and have trouble paying their necessary living expenses.
If you already have a payment plan, you may also qualify to use the online payment plan option to revise your existing agreement. Changes you can make online include revising payment dates, payment amounts and banking information for Direct Debit Installment Agreements.
Whatever you do, don’t just ignore the taxes you owe. If you don’t make arrangements with the IRS to use one of the options listed above, the IRS can take money out of your wages (wage garnishing) or your bank account (levying a bank account), which can put you in a worse spot. The IRS can also issue federal tax liens that can destroy your credit and make it hard to sell property or obtain a loan.
Do I have to pay my Taxes all at once?
No, you don’t. If you can pay your taxes, but just not quite at the tax due date, here’s what you should do.
File your return and pay whatever you can. The IRS will bill you for the rest. You’ll owe interest on the balance, and you might owe a late payment penalty.
Owing and not being able to pay a tax balance isn’t fun, but it’s only a problem if you don’t take action. If you have to pay your taxes late or if you can’t pay your taxes, you might still be able to work out something with the IRS.