Tax Debt Help - What to do if you're unable to pay your taxes in full.

This topic provides options on how to pay your outstanding federal income tax liability. The IRS offers payment options to make full or partial payments towards your tax liability. It is important to still file your tax return even if you cannot immediately pay the outstanding tax liability in full.

You may pay your tax liability in various ways. You may pay electronically or by sending a check or money order, made out to "United States Treasury". You may pay the full amount of your outstanding balance or any other amount you are able to pay. Be sure to include your social security number on your payment.

Consider financing the full payment of your tax liability through loans, such as a home equity loan from a financial institute or credit card. This is because your unpaid balance is subject to interest that is compounded daily and a monthly late payment penalty, so it is in your best interest to pay your tax liability in full as soon as you can to minimize the amount of interest and penalty charged. The interest rate a bank charges is usually lower than the combination of interest and penalties imposed by the Internal Revenue Code. Full payment will stop any further collection notices or other collection actions.

If you cannot pay in full immediately, the IRS offers short-term extensions of time to pay in full from 10 to 120 days.

If you cannot full pay your tax liability in a lump sum, the IRS offers a partial payment option. You may apply for an installment agreement. Installment agreements may be set up in various ways:

Direct debit from your bank account

Payroll deduction from your employer

Regular installment agreement

If you enter into an installment agreement, your payment amount should be based on your ability to pay and should be an amount that can be maintained over the lifetime of the installment agreement.

Direct debit or payroll deduction installment agreements provide you with the opportunity to make timely payments automatically, and therefore, these payment methods reduce the possibility of defaulting your agreement.

To request an installment agreement, when you are filing a balance due return, you may submit an Installment Agreement Request Form 9465, or your own written request for a payment plan, attached to the front of your return.

To request an installment agreement after your return has been filed and you have been billed (you received an IRS balance due notice), you may submit Form 9465 or your own written request for a payment plan, attached to the front of your return or bill.

You will need to specify the amount you can pay and the day (1st-28th) you wish to make your payment each month. The IRS will respond to your request, usually within 30 days, to advise you that:

your request is approved

your request is denied or

additional information is needed

If the agreement is approved, a one-time user fee of $43 will be charged and deducted from the first payment.

For direct debit installment agreements paid by electronic fund transfer, provide your checking account number and your bank routing number to initiate the automated withdrawal of the payment. You may contact the IRS by phone or in person, or you may submit Form 9465 (PDF), Installment Agreement Request, through the mail. The form has space for you to write your checking account number and your bank routing number. However, if you choose to do so, you may staple a voided check to the form.

To initiate a payroll deduction installment agreement, submit Form 2159, Payroll Deduction Agreement. Form 2159 must be completed by your employer, so the IRS will set you up on a regular installment agreement, and then convert it to a payroll deduction agreement upon receipt of the completed form from your employer.

Remember, penalties and interest will be added to the balance due even if an installment agreement is approved. For more information about installment agreements, please see www.irs.gov and enter the keyword "installment agreement".

Responding to your IRS notice.

It is important not to ignore an IRS notice. If you do not make payments or other arrangements to pay the amount you oThe IRS in full, The IRS may file a Notice of Federal Tax Lien, and The IRS may take enforced collection action which could include serving a Notice of Levy or offset of a tax refund. Refer to Topic 201 for information about "The Collection Process".

If you are unable to make any payment at this time:

Individual taxpayers may call 1-800-829-1040

Business taxpayers may call 1-800-829-4933 to receive assistance.

If the IRS determines that you cannot pay any of your tax debt, The IRS may temporarily delay collection until your financial condition improves. In order to assist you, be prepared to provide pertinent financial information from documents you should have available to you during the call, such as current pay stubs, rental agreements, or mortgage statements, and car lease/loan statements.