What To Do When You Can’t Pay Your Taxes

ROCKVILLE, Md. — Tax season is often a time when families reap the benefits of a large tax refund. Down payments for cars arrive from Uncle Sam, flat-screen televisions become a reality and the family vacation budget grows a bit larger. But for many Americans the months leading up to April 15 are filled with worrying, praying, and dread.

“A large tax bill is often a surprise for many people that can throw their financial lives off course,” said Pam Rhode, president of Myvesta, a nonprofit consumer education organization. “Many people expect to get a refund this time of year and don’t have the necessary cash to pay a large tax bill. That’s when panic sets in.”

According to Ms Rhode, it’s important to act quickly to explore all the options when you are faced with a daunting tax burden.

“While the Internal Revenue Service doesn’t have a reputation for being lenient when you owe back taxes, as long as you inform them of your situation before you are past due, there is a good possibility you can work out a payment plan,” Ms Rhode said.

While a payment plan set up through the IRS is an effective way to pay taxes over time, it’s not ideal for everyone.

“If your source of income is interrupted and you cannot make your regular payments, the IRS can take collections actions almost immediately,” Ms Rhode said. “Credit card companies don’t have the collections power that the IRS does, so if you think you might be at risk to default on an IRS payment plan, it’s a better idea to charge your taxes.”

More options for paying a tax bill are outlined in the Myvesta publication “How to Deal with the IRS if You Can’t Pay Your Taxes.” Visit the website at Myvesta.org, or for a printed copy send $5, payable to Myvesta, to IRS Publication, Myvesta, PO Box 7153, Gaithersburg MD, 20898-7153.