Times are tough all over, especially for millions of Americans who are unemployed or facing other financial difficulties triggered by one of the worst recessions in memory. With the deadline for filing your 2009 tax return fast approaching, it may be harder than usual this year to find the cash to pay Uncle Sam.
Pay what you can. If you owe taxes and can’t cover the whole bill, pay as much as you can when you file your return. That will reduce the penalties and interest that will continue to mount up until the balance is paid in full. (No penalties will be applied if you’ve paid at least 90% of the total tax bill by the April 15 deadlines, but interest will still accrue.)
Then wait for the IRS to send you a bill for the balance. That should give you some time to come up with the cash. If you still can't afford to pay the full balance, pay what you can to buy yourself an additional month or two until another bill arrives.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
File an extension. Or, if you act by April 15, you can file for an extension by using Form 4868 (electronically or by mail) to delay your tax-filing deadline by six months, until October 15. But an extension doesn't change the deadline for paying your taxes. You'll still incur interest charges and start racking up late-payment penalties of 0.5% a month on the unpaid amount, up to 25% of the balance, plus interest.
The installment plan. If you can't pay your taxes, contact the IRS at 800-829-1040 to discuss your payment options. You may be able to set up an installment plan if your tax debt is $25,000 or less and you are able to pay your bill within five years. File Form 9465, Installment Agreement Request, to set up an agreement. If your request is approved, the IRS will charge a set-up fee of $105 or $52 if you agree to make payments through direct debits from your bank account.
Cut a deal. In an extreme case, you may be able to file an Offer in Compromise and settle your tax debt for far less than you owe, if you can prove you don't have the means to pay and it is very unlikely that you ever will.
And believe it or not, the nation’s top tax collector has a heart. “The IRS wants to do everything it can to help people who have lost their job or face financial strain,” says IRS Commissioner Doug Shulman. “We continue to make adjustments to key programs and expand the ways for people to get help.”
IRS employees now have additional flexibility when considering Offers in Compromise from taxpayers facing economic troubles, including recent unemployment. Specifically, IRS employees will be permitted to take into account a taxpayer’s current income and potential for future income when negotiating an Offer in Compromise. Normally, offers are based on a taxpayer’s past earnings.
And, the IRS is working with state departments of revenue to help taxpayers, particularly the unemployed, who are having problems paying their taxes. It has also set up the Tax Center to Assist Unemployed Taxpayers with links to information on tax assistance and relief for struggling taxpayers.
Bottom line: If you can't pay your taxes, denial and delay only make a bad situation worse. Ignore it and you could eventually face some nasty collection procedures in which the IRS imposes a levy on your wages or bank accounts, or places a federal tax lien against your property.
-
Dow Hits New Intraday High on Fed Day: Stock Market TodayNot even the most important stock in the world could keep the oldest equity index down on a significant day for markets.
-
Savings Goal CalculatorTools Want to know how much you need to save each month to reach your financial goals? Our calculator helps you build a realistic savings plan.
-
The Most Tax-Friendly States for Investing in 2025 (Hint: There Are Two)State Taxes Living in one of these places could lower your 2025 investment taxes — especially if you invest in real estate.
-
The Final Countdown for Retirees with Investment IncomeRetirement Tax Don’t assume Social Security withholding is enough. Some retirement income may require a quarterly estimated tax payment by the September 15 deadline.
-
Standard Deduction 2025 Quiz: How Much Do You Really Know?Quiz Test your knowledge of IRS rules that impact how much money you keep in your wallet.
-
IRS in Turmoil: GOP Budget Cuts and Staff Shake-Ups Threaten Taxpayer ServicesIRS Republican lawmakers advance a controversial budget bill that would gut IRS funding further, risking your 2026 tax filing season.
-
Cruise Lines Sue to Block Hawaii’s New Climate Tourism TaxState Tax Your vacation to the Aloha State could come at a higher price tag next year. Here’s why.
-
21 Last-Minute Gifts for Grandparents Day 2025 to Give Right NowHoliday Tips Last-minute gifting is never easy. But here are some ideas to celebrate Grandparents Day.
-
New $6,000 'Senior Bonus' Deduction: What It Means for Taxpayers Age 65-PlusTax Changes If you’re an older adult, a new bonus tax deduction could provide a valuable tax benefit. Here's how it works.
-
Claiming the Standard Deduction? Here Are 10 Tax Breaks For Middle-Class Families in 2025Tax Breaks Working middle-income Americans won’t need to itemize to claim these tax deductions and credits — if you qualify.
