Question: What if I owe more money to the IRS than I can pay?
Answer: The IRS offers several options to taxpayers who cannot pay their taxes in full when they file their return.
1) You can charge your taxes on a credit card. The IRS’s credit card service providers charge a “convenience fee” of about 2.5% in addition to the interest rate your credit card company charges on your balance.
2) You can request to pay your taxes to the IRS in installments. If you owe $50,000 or less and agree to pay off the balance within a six-year period, the approval process is pretty straightforward. Larger balances can be set up on an installment plan too, but they won’t be automatically approved. The IRS will continue to add interest and penalties to your account until you pay off the balance.
3) You can enter into an “offer-in-compromise” agreement with the IRS to settle your tax bill and get off to a fresh start. Under this arrangement, the IRS will settle your account for a portion of the tax you owe if you agree to file and pay your future taxes on time. You’ll have to submit financial information to the IRS to prove that you don’t have the money or ability to pay off the entire balance.
