Tax Collection and Payment Alternatives
The IRS may take action to collect money if you do not pay the taxes you owe in full, if you do not pay the taxes you owe on time or if you do not make arrangements with the IRS to develop a tax payment plan.
It is in your best interest to pay any taxes you owe as soon as possible because the IRS will continue to charge you penalty and interest. If you cannot pay the full amount of taxes you owe by the deadline, you should still file your return and pay as much as you can to reduce penalties and interest.
- How can I pay my taxes?
- What if I cannot pay in full?
- What if I cannot pay at all?
- What if I do not pay voluntarily?
- What if I disagree with the IRS tax collection actions?
- Will the IRS settle for less than full payment (Offer in Compromise)?
- Check or money order made out to the Department of Treasury – Write your Social Security number or Individual Taxpayer Identificaton Number (ITIN), the tax form number and tax period on the check.
- Electronic Federal Tax Payment System (EFTPS) – EFTPS is a free tax payment system. You can transfer money from your bank account to pay your taxes by phone or online. For details, visit www.eftps.gov or call 1-800-316-6541.
- Credit Card – While you can pay your taxes with a credit card, these companies charge finance fees. To pay by credit card, contact one of the following service providers:
Depending on your specific circumstances, you may qualify for an extension or an installment agreement. Your options include:
- You can request an extension.
You may apply for an installment payment plan or a partial pay installment agreement.
- Note: For most taxpayers, the IRS generally charges a fee for setting up an installment agreement and interest and penalties continue to accrue during this time.
The worst thing you can do is do nothing at all. Call the IRS at the phone number on your bill if you cannot pay your taxes. Because you will need to give the IRS complete financial information make a list of your monthly expenses and monthly income before you call, and be prepared to discuss those with the IRS. Be sure to consider:
- Medical costs
- Transportation costs (e.g., gas, repairs, insurance, bus fares)
- Housing costs
- Other costs not recurring on a monthly basis, such as auto repairs (for these costs, consider your total yearly costs and divide that amount by 12 to come up with an average monthly amount)
If the IRS agrees that you do not have the ability to pay, it may temporarily suspend collection action. However, the amount you owe will continue to increase through additional penalty and interest charges.
If you do not pay your tax bill or contact the IRS to make arrangements to pay, the IRS will take action to collect, such as:
- Filing a Notice of Federal Tax Lien (NFTL) – A lien is a claim against your property that will appear on your credit report and it may harm your credit rating. The IRS will release the lien once the taxes, penalty, interest and recording fees are paid in full.
- Serving a Notice of Levy or seizing assets – The IRS can collect the amount you owe from your wages, bank accounts, Social Security benefits, retirement or other sources of income. If the tax isn’t paid and you haven’t made arrangements, the IRS may seize your car, home or other property. Prior to taking such action, you have the opportunity to request a hearing to resolve your tax payment issues.
- Applying other tax refunds – The IRS will apply any future federal and/or state tax refunds to pay down the debt you owe.
Depending on where you are in the collection process, you may be able to appeal the IRS collection actions through the Collection Due Process (CDP) or Collection Appeals Programs (CAP). For more information, see Publication 1660, Collection Appeal Rights, call 1-800-829-3676 or visit www.irs.gov.
An Offer in Compromise (OIC) is an agreement between a taxpayer and the IRS where the IRS agrees to accept less than the full tax amount owed. Once the taxpayer pays the reduced amount agreed to, the taxpayer’s tax liability (the amount of taxes owed) is resolved. For most taxpayers, there is a fee for submitting a request for an OIC and if a taxpayer can pay in full, the IRS will generally not accept an OIC.
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