What to do if You Owe the IRS Money for Taxes 2011, 2012

What do you do if you owe money to the IRS and can’t pay? This article tells you what to do when you actually owe the money, rather than when you are contesting an assessment.

It’s often best to pay the full amount of your tax liability on time if you can. If you get a bill for overdue taxes you are expected to promptly pay the tax owed including any additional penalties and interest. It may be wise to get a loan to pay the bill in full rather than to make installment payments.

You are also allowed to pay the bill with a credit card. Weigh the cost of interest on your credit card versus the cost of interest plus penalties the IRS will assess against you.

You may also pay by electronic funds transfer, check, money order, cashier’s check, or cash – every option is available, it just depends on what funds you have available.

If you cannot pay the full amount at one time, an installment agreement may be your best bet. The IRS will enter into agreements for installment payments, however, there is a one time processing charge to initiate the agreement. You must have filed all returns due and be current with estimated tax payments. If you are an employer you must be up to date on federal payroll taxes.

If you owe $25,000 or less in total, penalties, and interest, a web-based application is available, from IRS.gov. You can also mail an Installment Agreement Request, along with your bill. It should be sent in the envelope that you received from the IRS.

You may still qualify for an installment agreement if you owe more than $25,000, but you must go through an approval process. Consider your options carefully and then decide which is the best way for you to proceed.

If you still have questions, TurboTax Online can help you with all your income tax needs. TurboTax experts are knowledgeable, highly trained, US-based tax professionals, including CPAs, Enrolled Agents, and accountants.