I have a payment plan with the IRS for back taxes and can't pay what I owe for this year. What should I do?
The IRS doesn't like the fact that you owe back
taxes. When they give you an installment agreement and you make payments
on time, the problem of back taxes is, in their words, resolved. However, they will not allow you to add to that debt. If you do, bad things can happen. The most important requirements to keep an IRS installment agreement in good standing are that, as long as the payment plan is in effect, you must file future returns on time and pay all taxes, penalties and interest due on time. To
comply with those requirements, the first thing to do is prepare your
current year return so you will know how much you will owe. If you can't
pay that amount by April 15, file an extension. Then save money until
you have enough to pay when you do file. With
an extension, you will avoid the penalty for filing late but will still
be charged the penalty for paying late and interest. Tip: If you
file between April 15 and October 15, you can minimize the the late
payment penalty and interest by paying them when you finally file. If you don't do
that, you will get a billing notice saying that you owe more, which you should pay immediately to avoid having your installment agreement default. |