What do I do if I can't pay my federal taxes?

March 9, 2009 1:39 PM

What do I do if I can't pay my federal taxes?

I work freelance, and I am off on my estimated 2008 taxes by approximately $1100. The problem is work has become so slow for me now, that I don't think I will have this money available by April 14th.

What can I do considering my situation? Can I set up some sort of payment plan with the IRS? File an extension (is that applicable in this case)?

posted by helios410 to Work & Money (15 answers total)

See filing an extension from the IRS to see if your situation qualifies.
posted by sararah at 1:42 PM on March 9, 2009

Extensions apply for doing the paperwork, not paying the taxes, as I understand it. But they will absolutely set up a payment plan for you. The most important thing is to stay in contact with them and it will all be fine.

Also remember that the interest the IRS charges is way less than a credit card, so don't put your payment on one.
posted by Vaike at 1:43 PM on March 9, 2009

Online Payment Agreement Application
I know practically nothing about taxes. All I know is that this payment agreement exists. That is all that I am showing you here. You'll have to be the one to figure out if that is even remotely what you want.
posted by niles at 1:44 PM on March 9, 2009

Definitely talk to them, but get a second opinion first: maybe a tax professsional would find a loophole or two you missed.
posted by aquafortis at 1:49 PM on March 9, 2009

Back in the mid-90's when I was a perpetually broke drunkar...er, college student and found myself owing $300 on April 15th, I filed my return along with a check for $120 and a handwritten note stating that this was all I could afford at the moment, and that I would pay the rest as soon as it became available. Fast forward a few months later, and I received aa bill from them for the remainder of the amount plus interest which I had to go to the local IRS office to pay. I did, and that was that.

I am in no way suggesting that you do such a thing. It might be best to follow proper channels, preferably while sober. I just though it might be worth mentioning that the above approach actually worked - much to my amazement.
posted by Rewind at 1:57 PM on March 9, 2009

You could go here and not pay taxes.

Or just file an extension; you will qualify for an automatic 3 month extension, and probably an automatic 6 month extension. You should pay what you can when you send in the extension, so the interest is less down the road.
posted by RajahKing at 2:02 PM on March 9, 2009

Put it on a credit card. There's your payment plan. Sure, there may be lower-interest ways to handle it, but nothing's easier.
posted by MrMoonPie at 2:02 PM on March 9, 2009

A lot of people are in this boat this year, and the IRS has been doing a bit of a media blitz to let people know that you can work out a payment plan. Here's a little article about how to set up a payment plan and what it will cost you.
posted by craichead at 2:13 PM on March 9, 2009

You request a payment agreement, like niles' link above. There's also a paper form you can submit. Here's the full page on payment agreements. I had to do one once when I was a grad student and found the process pretty painless.
posted by cabingirl at 2:15 PM on March 9, 2009

The IRS should give you a payment plan with no problem. There's a few formal questions in the process to try to encourage you to take out a loan or charge it, but if you answer that you have no credit available they'll just rubber-stamp your payment plan as "approved". It's not like the big bad IRS of years ago.
posted by crapmatic at 2:22 PM on March 9, 2009

The IRS commissioner was on NPR the other day discussing this. He said what the posters above are saying: contact the IRS as soon as possible and they will set up a payment plan; this is a common situation and they have a process set up for it. He did mention that interest and penalties may apply and these are imposed by law, so there is little room for negotiation so be aware you will probably end up paying more. Extensions, as mentioned above, only apply to paperwork. When you file for one you still have to make a good-faith estimate and pay that. I did this a couple of years ago because I was waiting on some paperwork and actually ended up having to pay a good bit more than I expected (the missing paperwork involved some deductions). I got it back once I finished filing, but it was still a pain.
posted by TedW at 2:29 PM on March 9, 2009

I heard an IRS guy on NPR last week. he recommended literally writing a note with your return saying "I cannot afford to pay right now." He said in a few weeks they will contact you, or you can go ahead and call them.

The important thing is that you file your return. As noted above, an extension is an extension to file, not to pay. You will be charged interest, but not penalties, as long as you file on time and are prompt in making arrangements to pay.
posted by drjimmy11 at 2:30 PM on March 9, 2009

File return. File payment plan form. Nothing bad will happen to you as long as you keep current with the payment plan.

Be conservative when estimating what payment plan you can do--there's no penalty for early payment if you can get ahead, but leave yourself some cushion.
posted by Sidhedevil at 2:49 PM on March 9, 2009

Be conservative when estimating what payment plan you can do--there's no penalty for early payment if you can get ahead, but leave yourself some cushion.

Second that. I did this once and they pushed me during my initial request for higher payments; I had already figured out exactly what I could afford per month, and stuck to that figure. They accepted it.
posted by Miko at 4:10 PM on March 9, 2009

Do make sure that you've taken deductions for everything for which your entitled to a deduction. Turbo tax is great for this if you can get a copy from a friend or a used copy online. I was in this situation a number of years ago (I put it on my credit card), but I think I owed the money because I didn't take a deduction for state income tax (pretty stupid, I know). It's easy to miss a deduction if you're doing your own taxes.
posted by bananafish at 11:47 AM on March 10, 2009