If you owe the IRS taxes and you can’t pay the entire bill, you have some options.
Income taxes are due every year in mid-April (this year, the date is April 18), and even if you file a tax extension, you’re still required to pay your taxes in April. Failure to do so could result in late fees, penalties, interest, and more. In serious cases, it could result in jail time.
If you’re not able to pay your tax bill, you should pay as much as you can before the deadline, in order to reduce future interest or fees. From there, it’s a good idea to enroll in an IRS payment plan if you owe $50,000 or less in taxes. These online installment plans allow you to split your taxes into smaller monthly payments. You can opt for a short-term or long-term installment plan, and each has its own fees and requirements.
Though IRS payment plans generally have more favorable repayment terms and interest rates than other payment options, you can pay online with a credit card if you want to make sure your tax bill is paid in full. You may be charged a processing fee for using a card, however. From there, you’ll need to pay down your credit card balance to avoid accruing debt. You could also consider a personal loan if your tax bill is steep and you want a more favorable interest rate.
In some cases, you may also apply for first time tax forgiveness programs like First Time Abate which helps remove penalties from your taxes. This will not wipe out your tax bill, however, and is only available if you’ve paid your taxes on time for the past three years.
As a last resort, you can also ask the IRS to agree to an offer in compromise, which lets you settle your tax bill for less than you owe. This isn’t a common program and you’ll need to show you’ve faced financial hardship, and have a fairly spotless tax record for previous years in order to be considered.