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The Internal Revenue Service wants you to pay
taxes on time. That being said, it understands this is not always
possible and has created a program for such situations.
The IRS Solution If You Cannot Pay Your Taxes
The Internal Revenue Service is very upfront about its goal in dealing
with taxpayers. While it obviously wants to collect all taxes due, it is
also focused on keeping you in the system. This attitude is a relatively
recent change undertaken in the 1990s. The IRS essentially determined it
made better financial sense to have you in the system versus spending
hundreds of man hours hunting you down. In practical terms, this means
you need not have a panic attack if you do not have sufficient funds to
meet your tax obligation. If you panicked this past tax deadline, there
was no need.
The IRS will put you on a payment plan if you cannot pay your taxes on
time. The plan calls for monthly payments like a car loan, to wit, they
are an equal amount each month so you know what you are obligated to
pay.
You are only eligible for a payment plan if you file a tax return. Once
you file, you want to use form 9465 to request the payment plan. It
costs $43 to file the application. The IRS will then get back to you on
what it is willing to do. The payment plan process is not an audit.
Millions of people apply each year and the IRS considers it standard
operating procedure. No red flags are raised when you file the
application. To the contrary, the IRS tends to view you as an honest tax
payer since you are acknowledging the full amount due and trying to find
a way to pay.
Importantly, the payment plan should be viewed as a means to buy time.
Making the monthly payments will eventually pay off the debt, but it
will take years. Interest on the amount you owe will also continue to
accrue. The best strategy for using the plan is to make the monthly
payments while saving up money to make a lump sum payment to satisfy the
debt.
If you cannot pay the taxes you owe, do not panic. The payment plan
option will keep you out of trouble with Uncle Sam.
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