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Tax Tips

Rules for Paying Off Back Taxes

Tips for how to pay back what you owe to Uncle Sam over time.


I made a mistake on my tax return and now I've got a bill for back taxes. Will the IRS let me pay it over time?

Generally, yes. If you can cover the bill within a few months, call the IRS at 800-829-1040 to request a 120-day extension. Interest and penalties will continue to accrue during the extension period.

See Also: 15 IRS Audit Red Flags

Otherwise, pay off as much as you can now and apply for an installment agreement to split the rest of the balance into monthly payments. If you owe $50,000 or less in taxes, penalties and interest, apply at for a plan to pay off the bill over a period of up to six years; your application will likely be accepted, says Jackie Perlman, principal tax research analyst for the Tax Institute at H&R Block.

You're guaranteed an installment agreement for a balance of $10,000 or less as long as you've filed your returns and paid taxes on time for the past five years and you agree to pay off the current bill within three years. You'll pay a one-time fee plus a late-payment penalty and interest for each month the agreement is in effect.

For amounts higher than $50,000, you must submit IRS Form 9465 to apply and Form 433-F to detail your assets, liabilities and income.

See Also: 9 Costly Mistakes Taxpayers Make