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What To Do if You Can’t Pay Your Tax Debt?

Nov 29

If you find that you cannot pay your taxes, do not worry--you are not the only one. Not being able to make payments on time can result in stressful penalties and even possible criminal charges; however, there are options for those of us who fall into this predicament.

Understand The Consequences Of Not Paying Your Taxes

The Internal Revenue Service (IRS) enforces numerous strict penalties for those who are unable to pay their taxes on time. First, the IRS will add interest on top of the original amount due, which compounds over time. Additionally, failure-to-pay penalties may be assessed at up to 25 percent of the unpaid amount owed. Furthermore, the IRS may also impose additional fines when taxpayers fail to file their returns or make estimated payments on time. Penalties can also include criminal charges and jail time in certain cases. You must understand these implications so that you can take steps toward resolving your tax debt as quickly as possible.

Discuss With An Expert

If you are unable to pay your tax debt in full, you must speak with an experienced accountant or lawyer about your situation before taking any action. A professional will be able to examine your financial records and advise you on which repayment option is best suited for your needs. An expert will also help protect against any potential legal action taken by the IRS or other government agencies regarding delinquent tax payments. Additionally, they will assist in establishing payment plans or negotiating installment agreements with the IRS so that they can get back into compliance without facing any serious repercussions.

Look Into Settlements And Installment Plans

In some cases, it might be possible to settle your tax debt by making a lump sum payment or by setting up an installment plan with the IRS. With an installment agreement, outstanding tax debts may be paid off over some time through monthly payments based on one’s financial capabilities and budgeting needs. It's important to note that even if you enter into an installment agreement with the IRS, interest and late payment penalties will still apply until all taxes have been paid off in full.

What Is IRS Installment Agreement Plan?

The IRS has an Installment Agreement Plan which lets taxpayers pay their taxes back over time, rather than all at once. These agreements depend on the taxpayer's ability to pay and offer reasonable certainty that the taxes will eventually be paid in full. Through this plan, taxpayers can make monthly payments instead of incurring any more penalties or interest charges by not paying fully now.

Requesting An Installment Agreement From The IRS

The IRS provides three methods to set up an installment agreement. The easiest way is most likely their online payment agreement tool. You only have to fill out some essential information.

If you owe the IRS less than $50,000, you can finish your request for an installment agreement online. However, if you owe more money, you might need to download and submit additional paperwork. Always check the IRS website for their most recent form of the installment agreement.

Different Types Of Installment Agreements

The IRS has several installment plans with different conditions that you can choose from, and the best plan for you depends on how much money is owed as well as how quickly it needs to be repaid. Some of the more popular installment agreements are described in greater detail below:

Guaranteed installment agreement

Those who have fewer than $10,000 and could pay the whole amount within 120 days (or four months) may be eligible for a short-term guaranteed installment agreement. However, please note that there are several other requirements you'll need to meet as well:

  • If you don't already have an installment agreement,
  • You have timely filed your required taxes and returns for the past 5 years.
  • You will need to repay your balance, interest, and any related penalties within the required timeframe.

Unlike other programs that are extensive and complicated, our program is easy to understand with no setup fees. You also don't have to worry about a federal tax lien, so your credit score remains the same.

Streamlined installment agreement

The next type of agreement is the streamlined installment plan. You may be eligible for this plan if you owe less than $50,000 to the IRS in penalties and interest. Once approved, you will have up to 72 months to pay off your balance, with a minimum payment of $25 due each month.

Non-streamlined installment agreement

The third and final option is the non-streamlined installment agreement, which applies to those owing the IRS more than $50,000. This type of agreement requires completion of Form 433-F, which asks for additional information such as:

The IRS will get a clear understanding of your financial situation and business through this information, allowing them to set up an appropriate installment payment plan.


Taxes are an unavoidable part of life for citizens living in the United States; however, failing to pay them can lead to serious financial and legal consequences for individuals who cannot make their payments on time.

If you find yourself unable to pay your taxes in full, you must contact an experienced accountant or lawyer so that they can guide and advise you through this process while protecting against any potential legal action taken by the IRS or other government agencies regarding delinquent tax payments.

Furthermore, explore different settlements and installment plans offered by the IRS so that they can get back into compliance without facing any serious repercussions while ensuring their obligations are met affordably over a period depending upon one’s financial capabilities and budgeting needs.