PUBLISHED: 1:42 PM on Wednesday, April 13, 2005
What to do if you can't pay your taxes

If this year's tax filing deadline will be a "pay" day for you and you cannot pay the full amount that you owe, you should still file your return by April 15 and pay as much as you can.

You can charge your taxes on your American Express, MasterCard, Visa or Discover cards. To pay by credit card, contact one of the service providers at its telephone number or Web site listed below and follow the instructions. The service providers charge a convenience fee based on the amount you are paying. You will be told what the fee is during the transaction and will have the option to continue or end the transaction. Do not add the convenience fee to your tax payment.

If this option is not a good one for you, the IRS may allow you to pay any remaining balance in monthly installments through an installment agreement or possibly settle for less than the full amount owed through the offer-in-compromise program.

Official Payments Corporation

Phone 1-800-2PAY-TAX - (1-800-272-9829)

Web Site

Link2Gov Corporation

Phone 1-888-PAY-1040 - (1-888-729-1040)

Web Site

To apply for an installment payment plan, attach a Form 9465, Installment Agreement Request, to the front of your tax return. The IRS has streamlined the approval process if the amount you owe (not counting interest, penalties and other additions) does not exceed $25,000 and can be paid off, in full, in five years or less. Be sure to show the amount of your proposed monthly payment and the date you wish to make your payment each month.

The IRS charges a $43 fee for setting up an installment agreement. You will also be required to pay interest plus a late payment penalty on the unpaid taxes for each month or part of a month, after the due date that the tax is not paid. This penalty, usually 0.5 (one half) percent of the balance due, drops to a 0.25 (one quarter) percent rate if an installment agreement is in effect for that month. You must have filed your return by the due date (including extensions) to qualify for this reduced penalty.

If you do not file your return by the due date (including extensions), you may have to pay a failure-to-timely-file penalty. The penalty is usually 5 percent for each month or part of a month that a return is late, but not more than 25 percent.

If you find that you cannot pay your taxes, even through an installment plan, you can apply for an "offer in compromise" to settle your tax debt for less than the full amount owed. Acceptance is not automatic. The IRS will review your financial situation and future income potential to determine whether your offer is appropriate. Send Form 656, Offer in Compromise, and Form 433-A, Collection Information Statement, to the IRS to determine your eligibility. There is a $150 application fee.

Some individuals who have low income may qualify to have this fee waived. Those who claim a poverty exception must file Form 656-A, Income Certification for Offer in Compromise Application Fee.

For more information about filing and paying your taxes, refer to the Form 1040 Instructions or IRS Publication 17, Your Federal Income Tax. You can download forms and publications from the IRS Web site or request a free copy by calling toll free 1-800-TAX-FORM (1-800-829-3676).

Taxpayers who need Forms 9465, 656, 656-A, 433-A or any other federal tax form or publication should act soon to be sure they have the item in time to meet the April deadline.