Perhaps your estimated tax withholdings were not enough or maybe a tax bill has been growing over the years. Whatever the reason for a large, unmanageable tax bill it is important to know that there are options to help you pay your bill.
Option #1: Pay a portion of the bill. It can be beneficial to pay off at least some of the bill. This generally means the Internal Revenue Service (IRS) will only penalize you for the unpaid portion of the tax bill.
Option #2: Payment plan. In some cases, a taxpayer can agree to an extended payment plan with the IRS. This can span from approximately three months to an agreement that lasts over three months.
The IRS may require a taxpayer agree to automatic withdrawal before it will approve a repayment period that lasts beyond three months.
Option #3: Claim hardship. The IRS will allow an extension if the taxpayer can establish that they are suffering from undue hardship.
Option #4: Offer a compromise. An “offer in compromise” is an offered payment made by the taxpayer. The offer is less than the total tax bill, but the IRS may accept it in lieu of the bill. Why? If the taxpayer can establish this is all they can pay, the IRS can justify accepting the deal because some money is better than none at all.
It is important to meet the April 15 tax filing deadline, even if you are not sure how to pay your tax bill. A failure to file can result in a levy — which comes with financial penalties. For every month you fail to file with the IRS, you can face a bill of five percent of the unpaid balance. This can build to a total penalty of 25 percent of the unpaid balance.
