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	FAQ:
	What if I Can't Pay Uncle Sam?
First and most importantly, don't let your inability to pay your tax liability in full keep you from filing your tax return properly and on time. Include as large a partial payment as you can. Simply filing your return, even if you don't include full payment, can save you substantial amounts in late filing penalties. Not only that, but you can keep the IRS wolves at bay with some payment extension procedures and installment payment arrangements. This will keep the IRS collection division from instituting its collection process. Too many taxpayers hide their heads in the sand when they run into financial difficulties and fail to file their tax returns. But tax liabilities don't go away if ignored. It's very important that you file a properly prepared tax return even if full payment cannot be made. If you don't cooperate with the IRS, you can expect escalating penalties, plus the risk of having liens assessed against your assets and your income. Down the road, the collection process could also include seizure and sale of your property. In many cases, these tax nightmares can be avoided by taking advantage of arrangements readily offered by the IRS. So... what can you do if you don't have the money? Here are five solutions: Pay Late If your inability to pay the taxes you owe is simply a short-term cash-flow problem, and you'll have the funds to make the payment in a few weeks or months, the solution is reasonably simple. Pay as much as you can when you file your tax return. That payment will help reduce the penalties and interest you'll be charged. In about 45 days, the IRS will send you a bill for the remaining balance due. If you can pay it then, great... do it. If you can't, then send as much as possible (again, reducing penalties and interest) and hang on. In another 45 days or so you'll get another bill from Uncle Sammy. Hopefully you can then pay the balance due. You'll likely be able to go through two or three of these billing "cycles" before the IRS bugs you for some type of "formal" payment method. But, if you can clear up the matter using bigger "chunks" of payments over two or three IRS billing cycles, you'll pay some interest and penalties, but you'll save some time by not being required to complete any additional IRS paperwork. But be advised: That decision will cost you interest on the unpaid balance plus a late payment penalty of 0.5% monthly. Borrow As we playfully discussed above, try to put the bite on your friends or family. Seriously. If you can pay the entire amount with funds that you've borrowed from friends or relatives, you'll reduce the penalties and interest you'll owe Uncle Sammy. And, I'm sure you'll find making repayments to friends and/or relatives a much more pleasant experience than making payments to the folks at the IRS. If the friends or family thing doesn't work out, consider a bank loan. Again, paying your friendly banker is generally preferable to making payments to the IRS over a long period of time. Pay By Credit Card Remember that you can always go the credit card route. As an alternative to paying by check, the IRS (and many states) will gladly accept payment by credit card. We generally don't recommend credit card payments, because the fees and interest rates associated with this type of payment are pretty high. But, sometimes you gotta do what you gotta do. You can use your American Express, MasterCard, or Discover card (but not your Visa card) to make your payments. Installment Agreement If you're still reading, it's possible that none of the above solutions fit. If that's the case, you still have one option left. You should consider a formal installment agreement with the IRS. But now you're talking about dealing with the IRS directly, and possibly completing some additional forms and paperwork. Generally, the IRS will accept an installment agreement if the tax owed is less than $25,000 and the balance due will be paid within five years. You'll be required to pay a "user fee" (currently about $43) to obtain the installment agreement, and you'll still get hit with late payment penalties of 0.25% monthly. But an installment agreement is still better than ignoring your obligation to Uncle Sammy. If you think an installment agreement is for you, make your request on IRS Form 9465 (Installment Agreement Request). This form is available on the IRS website. You can file this form separately, or you can simply attach the form to your tax return (that you'll want to file by the normal mid-April deadline). The form is only one page long and requires a minimal amount of information, although the IRS could request more information from you down the road. Extension to Pay If all else fails, you can request a six-month extension of time to pay your taxes. But this extension will only be granted if the payment will cause undue hardship on you or your family. And don't confuse the term "undue hardship" with "inconvenience." You'll have to prove that you can't sell assets and/or borrow to pay your taxes except under terms that would cause severe loss and undue hardship. As with the installment agreement, you'll be required to file additional documents. You'll have to provide statements of assets, liabilities, income, and expenses for three months preceding the filing due date. You can use IRS Form 1127 (also available at the IRS website) should you find that you might qualify for an extension of time to pay your taxes. But be warned: Form 1127 must be filed by the due date of the tax return. And even if you do qualify for an extension to pay, you'll still be charged interest on the balance due.

The information provided here should not be relied on as a substitute for independent research to original sources of authority. TaxAid does not render legal, accounting, tax, or other professional advice. If legal, tax, or other expert assistance is required, the services of a competent professional should be sought.