• I have an installment agreement for back taxes and can't pay what I owe for this year. What should I do?

I have an installment agreement 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.

The most important requirements to keep an IRS installment agreement in good standing are that you must file future returns on time and pay any tax 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 with the penalty for paying late and interest. So, if you file between April 15 and October 15, be sure you include the late payment penalty and interest when you finally file. If you don't do that, you will get a billing notice saying that you owe more -- and that will default your installment agreement.