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Paying Overdue Taxes

Options for paying taxes and penalties owed to the IRS include:

Full Payment.

Pay the full amount, including tax, interest, and penalty.

Installment Program.

You can request to pay what you owe in monthly installments, i.e., if you owe $1,200, you could offer to pay $100 a month, plus interest at the end of the year.

Uncollectible Status.

If the IRS judges that your income level is insufficient to pay for the necessities of life and income taxes, your account can be placed in Uncollectible Status. This means that the IRS will stop trying to collect from you, but it does not cancel the debt, and interest owed continues to accrue daily.

Offer In Compromise.

If you are confident that you will never be able to pay the full amount that you owe, you can make an offer to cancel the amount you owe. For example, if you owe $10,000 to the IRS, you might offer to pay $2,000 to settle. This will be accepted only under extreme circumstances, in which the IRS has ruled out the possibility of an Installment Program or Uncollectible Status. If you are considering this option, seek professional help.

It can be intimidating to approach the IRS. As scary as it may seem, repaying your overdue taxes will benefit you. Your reported income and how much you have paid in taxes over the years will affect the amount of your Social Security and Medicare benefits. Filing your taxes also affects your eligibility for educational grants, credit, and loans. Remember, you don't have to work with the IRS on your own. Seek help from an accountant and ask friends and your case manager for support.

For more information on taxes, forms and publications and how to contact your local office go to:
www.irs.gov