What If I Owe Taxes With My Return But Do Not Have the Money to Pay Them?
You've just finished doing your taxes and discovered that instead of getting a nice check from Uncle Sam, you owe him one. The situation may be even bleaker if you just don't have the cash to pay your taxes. Fortunately, there are a few possible solutions, depending on your financial situation.
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Get a Loan
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No one likes debt, and especially when you're not getting anything out of it, like a new car. However, getting a personal loan to pay Uncle Sam may save you money in the long run, because unpaid taxes will accrue interest and fees that are likely to be higher than those associated with any personal loan you get. If your credit is shot and getting a personal loan is simply not possible, consider asking a trusted family member or friend to make you a loan.
Pay in Installments
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If you truly can't come up with a lump sum of cash to pay what you owe in taxes, the Internal Revenue Service offers installment payment plans. People owing $25,000 or less are eligible for this option, as long as they can pay off their total tax bill within five years. To apply, you'll need to fill out Form 9465, available through the IRS's website. You'll be charged interest on what you owe.
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Make an Offer in Compromise
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An offer in compromise is a program under which you pay the IRS less than what you owe, and the IRS in turn considers the debt settled. This option is only for taxpayers under extreme financial duress. Only people who have a positive tax filing history qualify. You can submit an offer in compromise by completing Form 656, which is also available on the IRS' website. There is a $150 application fee.
Final Word
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It may seem tempting to just not file your taxes at all. While there is no such thing as debtors' prison in the United States, you won't go to jail for owing Uncle Sam money. But you can face jail time for not filing your taxes, which is considered tax evasion -- a federal crime.
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