To pay off tax debt, you have several options depending on your financial situation:
Pay in Full If Possible
- If you can pay your tax debt in full immediately, this is the best option to avoid additional interest and penalties
Partial Payment
- Pay as much as you can now to reduce penalties and interest and then explore other options to pay the balance over time
Payment Plans (Installment Agreements)
- You can apply for a payment plan with the IRS to pay your tax debt over time in monthly installments.
- There are different types of payment plans depending on your amount owed and financial situation, including short-term and long-term agreements.
- Fees may apply for setting up a payment plan, but low-income taxpayers may have fees waived or reduced.
- You can apply online or by submitting Form 9465 to the IRS
Offer in Compromise
- This program allows you to settle your tax debt for less than the full amount owed if you qualify.
- The IRS evaluates your income, expenses, assets, and overall financial condition to determine eligibility.
- It is ideal for taxpayers facing significant financial hardship
Temporary Delay of Collection
- If you cannot pay anything now due to financial hardship, you can request the IRS to temporarily delay collection until your situation improves
Other Options
- Borrowing from a 401(k) loan if allowed by your plan.
- Using a credit or debit card to pay (note fees and potential high interest on credit cards).
- Taking a personal loan from family, friends, or financial institutions
Working with Professionals
- Tax relief services or tax professionals can help negotiate with the IRS and identify the best payment or settlement option based on your circumstances
In summary, the most common approach is to either pay in full or set up an installment agreement to pay over time. If you face financial hardship, explore an offer in compromise or request a temporary delay. Always communicate with the IRS and consider professional help if needed to avoid penalties like liens or wage garnishment
