I Owe Taxes - What If I CANNOT Pay In Full?

Whether you owe the IRS or State Taxes and you cannot pay the amount immediately, there are options:

1. Installment Agreement. The IRS will normally take installment payments, if you cannot pay the entire tax debt at once. The penalties and interest will continue to accrue until the entire amount is paid in full. Depending upon what state you live in, you may be able to set up an installment agreement with your state, the penalties and interest will no doubt accrue for the duration of the payment plan.

2. "Currently Not Collectible": The IRS has provisions for taxes that can be placed in an uncollectible status. There are several reasons that the IRS will place an account in this status. One of the provisions is that of financial hardship. The IRS will request that you provide financial information and compare it with the IRS collection standards. If your financial form indicates that your household cash flow available to live on does not exceed your "reasonable and necessary living expenses" (as determined by the IRS), the IRS will place you in "Currently Not Collectible" otherwise known as "Uncollectible Status". No payments are required and the IRS will not levy your bank account or garnish your wages, however, they may still file a tax lien your you as well as any property owned. The tax is still owed and the penalties and interest will still accrue. This status is not permanent and you will usually be asked to reassess your financial situation, normally every two years. You must continue to file your taxes every year. If you remain in an "Uncollectible Status" until the statute of limitations expires, the taxes will no longer be owed. The statute of limitations on taxes owed is 10 years after the tax has been assessed. You will need to check with your states tax laws to see if this provision applies.

3. "Offer In Compromise" - An Offer In Compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can't pay your full tax liability, or doing so creates a financial hardship. The IRS will consider your ability to pay, your income, expenses and asset equity. You must be current on your tax filings and are not eligible if you are in an open bankruptcy proceeding.

4. Discharge in Bankruptcy - If Taxes were assessed three years ago and you filed a return at least two years ago you can file either a Chapter 7 or 13. In a Chapter 7, the tax amount due may be discharged (no longer owed), in a Chapter 13, the tax amount will be payed as an unsecured debt (which may include you not having to pay the entire amount due). Penalties and Interest cease to accrue when a Chapter 13 is filed. However, if a tax lien is placed on your property, it may stay on your property for the duration of ten years, or until the statute of limitations runs out or until the debtor can negotiate with the IRS to remove the lien.

5. Slow Pay Motion -If the IRS has moved to file to garnish your wages, you can file a "Slow Pay Motion" with the court. You can do this yourself, obtaining the form from the County Clerk. But you may want to seek the advice of an attorney. This option allows you to pay small payments while being able to pay your other bills and living expenses.

These are the options I have found but it would be wise to seek the advice of a Tax Attorney. The IRS website holds a lot of information on all options to pay your debt.