Options to Pay Taxes
Estimate the total amount of tax you may owe before you complete a tax return. The eFile tax tools are free and easy to use.
Even if you do not have enough money to pay your total tax debt, a tax return should be efiled or filed to avoid further penalties for failure to file. Once your tax return is filed, the IRS can assist in setting up an alternative payment plan.
Regardless of circumstances, you should file or efile your tax return by April 15. You can always file an amendment to your tax return later if you need to add or change something on your tax return. Even if you owe more taxes than you can afford to pay, eFile recommends that you file or efile a tax return by April 15. Not sure whether to efile a tax return or a tax extension?
Tax Payment Options on efile.com
Once you start and efile your tax return on efile.com you have the following payment options: (Even if you cannot afford to pay all taxes due, pay what you can afford.)
- Direct Bank Payment: Enter your bank information (account number and routing number) on efile.com and the IRS will transfer funds directly from your bank account. This is a secure transaction.
- Check by Mail: Mail your check to the IRS address listed on your tax return. The mailing address is based on your state residence. Make the check out to "United States Treasury" and write on the check: your social security number, your daytime phone number, the tax year, and which tax return form you filed.
- Pay your Taxes by Credit Card: The IRS accepts American Express, Discover, MasterCard, and Visa. The IRS does not charge an extra fee for paying your taxes by credit card, but the processing company may charge a "convenience" fee based on the amount you charge (generally 1.95%-2.35% of the total charge).
- Pay your Taxes by Debit Card: The IRS accepts NYCE, Pulse, Star, and Visa debit cards. The IRS does not charge an extra fee for paying your taxes by debit card, but the processing company may charge a flat fee of $3.89-$3.95.
Credit and debit card tax payments may be made through any of the three official processing companies:
Additional Ways to Resolve Tax Debts
Taxpayers with a balance due on their tax return should consider:
- Cash advances on credit cards
- Bank loans
- Home equity loans
- Liquidating savings accounts, savings bonds, stocks, etc.
- Liquidating assets (luxury vehicle, real estate, etc.)
- Borrowing against Individual Retirement Account, Life Insurance, etc.
For your information, interest is charged on unpaid taxes from Tax Day until the day you complete payment. You should file your tax return on time even if you cannot afford to pay all of your tax debt in order to avoid the biggest penalties. The current failure-to-file penalty is 5% of your total taxes owed, applied monthly, but the failure-to-pay penalty is only 0.5% per month. Learn more about tax penalties.
What if I Cannot Afford to Pay My Taxes?
Watch video about having trouble paying taxes.
A. File on Time
Even if you cannot pay the full amount of your tax debt on time, you should file your tax return on time in order to avoid greater penalties. You may file a tax extension to extend your filing deadline until October 15, but if you file a tax extension without paying your taxes, you will still incur penalties and interest until you pay the full amount owed.
B. Short-Term Extension of Time to Pay
If you think you will be able to pay the full amount of the taxes you owe within 120 days, you should call the IRS at 1-800-829-1040 and talk with a representative to see if you can qualify for a short-term extension of your time to pay. You may also request a short-term extension using the Online Payment Agreement (OPA). If the IRS grants you an online approval of your request, you should receive written confirmation within 10 days. There is no extra fee for an extension to pay. If you are granted an extension of time to pay, you may still owe interest on your tax debt, but you will avoid incurring the application fee for requesting an installment agreement.
C. Installment Agreement
If you are not able to make a single lump sum payment of your full tax debt, an installment plan will allow you to pay your debt over time. If you owe $25,000 or less in combined tax, penalties, and interest, the easiest way to set up an installment plan is to use the Online Payment Agreement (OPA).
You may also apply for an installment plan by filling out and mailing Form 9465, Installment Agreement Request.
The easiest way to ensure timely payments is to have them directly debited from your bank account on a set schedule. If you wish to enter into an installment agreement in which your payments are you should fill out Form 433-D, Installment Agreement, and attach it to your Form 9465. If you wish to make your payments by having funds automatically withheld from your paycheck, fill out and attach Form 2159, Payroll Deduction Agreement.
The IRS will charge a one time user fee of $105 for a request to enter into an installment agreement. If you set up a direct debit installment plan, the user fee will be reduced to $52. The user fee will generally be added to the total amount of back taxes, penalties, and interest that you owe. If you break your agreement by missing a payment but choose to reinstate it, or if you restructure the agreement, you will be charged an additional $45 user fee. If you default on an installment payment plan, additional penalties may be assessed and your credit score may suffer.
In order to be eligible for an installment agreement you must have filed all of your tax returns that are due. The IRS guarantees not to turn down your request for an installment agreement if:
- You owe no more than $10,000 in taxes
- You have filed your tax return and paid your taxes on time for the last 5 years
- You agree to pay all of your outstanding debt within 30 days
- You agree to comply with all current tax laws during the period of the agreement
- You supply the IRS with all requested information while they evaluate your financial situation
- The IRS determines that you will be unable to pay the full amount due by the deadline without undue hardship
If the IRS grants online approval of your request for monthly installments, you will receive written confirmation within 10 days.
While participating in an installment agreement, any tax refunds to which you are entitled will be applied to your outstanding tax debt.
If you owe more than $25,000 in combined tax, penalties, and interest you may still qualify for an installment agreement, but you may be required to complete Form 433-F, Collection Information Statement.
Learn more about the Online Payment Agreement (OPA).
Make an Online Payment Agreement (OPA).
Tax Tip: Compare Rates! After you have filed your taxes, calculate the interest rates on the taxes you owe. Interest rates are currently low, so see if you can borrow the money at a lower rate than the IRS interest rate.
D. Offer in Compromise
An offer in compromise (OIC) should only be pursued after you have exhausted all other payment options. If special circumstances have arisen in your life which you believe will make it impossible for you to ever pay the full amount of taxes you owe, you may make an offer in compromise to the IRS. If accepted, an offer in compromise will allow you to settle your tax debt for a smaller amount than you owe (but not for "pennies on the dollar", as some unscrupulous advertisers would have you believe).
In order for an OIC to be accepted by the IRS, the offer must be a realistic appraisal of what you can actually pay. By law, the IRS has 10 years to collect back taxes and they will only consider an offer in compromise if they believe they will be unable to collect the full amount owed within that period of time. The IRS will take many things into consideration when deciding if you can pay the full amount, including your prior year earnings, your future earning potential, your current income, and your currently held assets. As of March, 2010, the IRS has new flexibility in considering your offer in compromise if you are recently unemployed or facing other financial hardships. If the IRS approves your offer and your financial situation subsequently improves, they have the right to increase the amount of your payments.
There are three claims which may serve as the basis for your offer in compromise to be accepted:
- Doubt as to liability: There is doubt about whether you actually owe the taxes in question.
- Doubt as to collectability: There is doubt that you could ever pay off the full amount of your tax debt (your tax debt is greater than your assets plus your potential future income).
- Effective tax administration: There is no doubt about liability or collectability, but there are special circumstances affecting your ability to pay.
There are three ways to pay your offer in compromise:
- Lump Sum Payment: The full debt must be paid in 5 or fewer installments.
- Short-Term Periodic Payment: The debt must be paid within 24 months.
- Deferred Periodic Payment: The debt may be paid in more than 24 months, but must be paid within the 10-year statutory period which the IRS has to collect the debt.
You may apply for an offer in compromise based on doubt as to collectability or effective tax administration by filling out and mailing Form 656, Offer in Compromise.
If your offer in compromise is based on doubt as to liability, you should use Form 656-L, Offer in Compromise (Doubt as to Liability).
There is an application fee of $150 for making an offer in compromise. For the IRS to consider your offer, you must include the fee with your Form 656, as well as the first 20% of your Lump Sum Payment offer, or the first installment of your Periodic Payment offer. Also, you must have filed all of your currently due tax returns before submitting an offer in compromise. Furthermore, you must fill out and attach Form 433-F, Collection Information Statement, if you are requesting an OIC based on a claim of doubt as to collectability or effective tax administration. You do not need to include an initial payment if you are making a claim based on doubt as to liability.
Please note that if you fill out the forms incorrectly, fail to attach the correct forms, fail to include your first payment, or fail to provide the IRS with any requested financial information within the time they give you, the IRS will not accept your offer in compromise. If the IRS rejects your OIC for one of these reasons or because of the results of their financial analysis of your situation, they will keep your application fee and first payment and apply the funds to your outstanding tax debt. If you default on an offer in compromise payment plan, the IRS may assess additional penalties and may inform the credit reporting agencies (thus damaging your credit rating).
To learn more details about offers in compromise, see Form 656-B, Offer in Compromise Booklet.
For more information about the various ways to pay off a past due tax debt, see Publication 594, The IRS Collection Process.
Learn more about efiling a tax extension.
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