Sometimes you don't have enough money to pay when Tax Time rolls around. Regardless if you have the money or not, your taxes are still due. And if you do not pay, your risk the IRS issuing Tax Levies, Liens, and Seizures against you.
The first good thing to know is that you can buy more time. If you know you will not have enough money to pay before Tax Time, you can file an extension with IRS Form 4868 " Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. " This will prevent the 5% per month late filing fee you'll receive if you decide to put off filing simply because you cannot pay.
But if it's already too late and you filed late, your Tax Debt is growing at an alarming rate. You need to get the facts and find a solution for your debt and fast. Here are options for those who simply do not have a dime to pay the IRS:
* Currently Not Collectible/Hardship: If you can prove to the IRS that you cannot pay your IRS debt and have no assets, you may qualify for this program. When your account is in Hardship Status, collections actives will be suspended temporarily. You have to file IRS Form 433A and detail your entire financial situation. You'll also need to gather plenty of documentation to prove your point.
* Suspended Collections: With Suspended Collections, the collections activity on your debt may be suspended until the Statute of Limitations on your account runs out. Taxpayers that usually qualify for Suspended Collections are those who earn disability or social security as their sole income.
If you have disposable income, you will not qualify to have collections activities suspended. But there are still options available for those with low incomes.
* Installment Agreement: You can pay your IRS Tax Debt monthly, much like you pay on monthly Credit Card Debt. But with some big differences. First of all, the IRS Installment Agreement is a binding contract and you cannot default on a payment. And second, the IRS will choose the amount you pay monthly based on your calculated disposable income.
* Offer in Compromise: You can settle your IRS Tax Debt. But this is an extremely difficult process. You have to go through 45 pages of paperwork and submit plenty of documents to prove why you need your IRS Debt Settled. Also, your chances of having an Offer in Compromise approved are greatly reduced if you do not have a professional submit your Offer for you.
Working with the IRS is very difficult. It's hard to even contact your Revenue Officer. It's a very good idea to have a professional negotiate with the IRS on your behalf when you can't pay back taxes.