Your tax return is done, but you realize you don’t have enough cash to pay Uncle Sam. What should you do? Don’t panic, you are not alone. You won’t go to jail unless the IRS can prove you intentionally didn’t pay your taxes. The IRS has some options and will work with you. You should still file your return by the deadline and pay as much as you can to avoid penalties and interest. You should also contact the IRS to discuss payment options at 1-800-829-1040. Here are some of the options:
- File an extension using FN 1127. This provision allows you time to pay without incurring penalties if you have a severe financial hardship. You will still have to pay interest.
- Work out a payment plan using FN9465. You may qualify without having to give any more documentation if you don’t owe more than $25,000. Refer to IRS Publication 17 for more information.
- Ask for a settlement. This is a last resort and there are stringent criteria to qualify.
Whatever you do, don’t fail to file your taxes. Don’t try to hide because things will only get worse. You may want to consider hiring an enrolled agent (EA), CPA, or tax attorney to help you negotiate with the IRS.