Unable to Timely Pay IRS Taxes? What Are Your Options?

Maicher CPA Pllc provides tax services to individuals and businesses. The IRS expects
taxpayers to pay timely their taxes. To ensure compliance, the IRS is empowered to impose
interest/penalties on unpaid taxes along with seizing taxpayer’s wages, bank accounts, real estate and other assets. Yet, sometimes taxpayers cannot pay timely because of serious setbacks largely outside their control. Maicher CPA serves clients concerning payment options. What are the options? Initially, though, what are some general observations and pointers?

Observations/Pointers: To qualify for a plan and other payment relief, taxpayers must file all tax
returns for the past 6 years. Also, IRS approval of a plan or other relief, does not resolve state tax
obligations which require separate arrangements with state tax authorities, such the Minnesota
Department of Revenue, and not covered here.

Payments options:

1. Short Term Payment Plan. Short term payment plans may be granted if the combined taxes,
penalties and interest owed is less than $100,000 and the payment period is 180 days or less.
Payment here is subject to interest along with penalties up to 5% of unpaid taxes each month.

2. Long Term Payment Plan – Taxpayers may qualify for a long term payment plan if the
combined tax, penalties and interest are less than $50,000 and the payment period exceeds
120 days. Long term payment plans, subject to interest and penalties, come in various
versions relating to payment periods and amounts.

3. Offer in Compromise. Alternatively, taxpayers can seek an “Offer in Compromise” and if
approved, requires payment of only a portion of the taxes to satisfy the total tax debt. To
have an application considered requires: (a) the filing of the past six years’ returns and
making of estimated payments, (b) no open bankruptcy proceedings and (c) a valid extension
for a current return (if applying for the current year). In assessing applications, the IRS
considers the taxpayer’s ability to pay, income, expenses and asset equity. Offers are
generally favored where they represent the most the IRS can collect within a reasonable
period.

4. (Taxes) Currently Not Collectible. Another option is to seek an IRS determination that the
tax cannot currently be paid given the taxpayer’s financial condition. Approval means a
delay in collection until the taxpayer’s financial condition improves but does not mean the
tax debt is satisfied like in the case of Offers in Compromise.

Take-away: The IRS expects timely payment of taxes and has broad enforcement powers
ensuring the same. But taxpayers unable to make timely payment have potential options. Call Maicher CPA for an appointment if you’re concerned about paying taxes timely.

Sources:
IRS Publication – “IRS Topic No. 202 Tax Payment Options,” (Reviewed/Updated: March 10, 2022).
IRS Publication – “Additional Information on Payment Plans,” (Reviewed/Updated: March 10, 2022).
IRS Publication – “Offer and Compromise,” (Reviewed/Updated: July 11, 2022).
IRS Publication – “Temporarily Delay the Collection Process,” (Reviewed/Updated: June 22 2022).