Options for Taxpayers Who Can’t Pay the Taxes They Owe

Options for Taxpayers Who Can’t Pay the Taxes They Owe

The 2019 tax filing deadline for most individual taxpayers is now July 15, 2020. Individual taxpayers may request an automatic extension of October 15, 2020 to file their returns; however, any 2019 taxes owed are still due on July 15, 2020. Even if you can’t afford to pay your taxes, individual taxpayers should file their returns or request an extension, to avoid the higher penalties imposed for not filing a timely return.

Whether it has caught you by surprise, or you find yourself unable to pay your current tax bill due to the current economy, your payment options are summarized below:

  • Short-term Online Payment Arrangement (OPA): This option is for those individuals that owe less than $100,000 in combined tax, penalties, and interest and can pay their bill, in full, within 120 days. There is no fee to apply for a short-term OPA; however, applicable penalties and interest continue to accrue until the liability is paid in full. Apply for a short-term OPA online or call the IRS directly at (800) 829-1040.
  • Installment agreement: This option enables taxpayers to pay their liability over a period. Use the same online application as for the OPA or you can submit a Form 9465. There is a setup fee of $31 if applying online, $107 for direct debit installment agreements, or $225 for non-direct debit installment agreements. Penalties and interest still accrue during the term of the installment agreement, although at half the usual rate (.25%). The three types of installment agreements are:
    • Guaranteed installment agreement – IRS Sec 6159(c) requires the IRS to accept proposed installment agreements from an individual who (1) owes income tax of $10,000 or less (excluding penalties and interest), (2) agrees to pay the liability in full within three years, (3) hasn’t entered into an installment agreement within the last five years, (4) hasn’t failed to file an income tax return or pay any tax due for the last five years, and (5) agrees to file all returns and pay any tax due during the term of the agreement.
    • Streamlined installment agreement Available to taxpayers who owe $50,000 or less in combined tax, penalties and interest and can pay their liability in full within 72 months.
    • Regular installment agreement For amounts over $50,000. These agreements are evaluated on a case-by-case basis and require submitting extensive financial information. If possible, pay enough tax to reduce the balance below $50,000 to qualify for the streamlined installment agreement.
  • Offer in Compromise (OIC) – A written agreement with the IRS that allows the taxpayer to pay a lesser amount in full satisfaction of an unpaid tax liability (including interest and penalties). The criteria are very strict. Taxpayers should use the Offer in Compromise Pre-Qualifier tool to determine if they are eligible for an OIC. Form 656 is used to apply for an OIC with additional financial information submitted on Form 433-A.

Other options may exist for those who can’t pay due to undue hardship, a federally declared disaster, a terrorist act, or military action.

At ADKF we can explain your options and discuss your best course of action.  We also have a Department of Tax Controversy that can assist with any of your IRS issues. Please call us at 210-829-1300, if you need assistance.

is the largest, locally owned public accounting firm in San Antonio, Texas, with branch offices in Boerne and New Braunfels. We have been serving our community since 1991. We are a full-service CPA firm dedicated to providing a broad range of tax, audit, bookkeeping, tax controversy, and consulting services with superior customer service to help our clients meet their goals and objectives. Please click here to set an appointment with us.

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