The IRS Wants Money and I Can’t Pay. What Now?

Alden Wicker

Hey there, this story refers to the 2011 tax year. For the most up-to-date information covering the 2012 tax year, check out What to Do if You Can’t Afford to Pay Your Taxes.

If you owe money to the IRS for taxes this season, but you don’t have enough cash in your bank account to cut the check, all is not lost. First things first: Make sure to file your return. That way, you avoid the failure-to-file penalty.

Next, decide how much you can pay. The more you pay down now, the less you will pay in interest and the monthly late payment penalty.

Then, depending on your circumstances, you can request an extra 120 days to pay, either through the Online Payment Agreement application or by calling 800-829-1040.

Owing money to the IRS

It’s important you address this now, because if you don’t pay or get an extension, the IRS will send you a bill for the amount you owe, which starts the collection process, somewhere you don’t want to be–both for your emotional and financial state.

If you don’t think you can make the deadline, you have several options:

If You Owe …

Less Than $300: Put It on Your Credit Card

This is the easiest way to do it. If you are just waiting for a paycheck and can pay it off at the end of the month, there’s no reason not to put it on your credit card. If you think you will be carrying a balance if you use your credit card to pay, use this calculator to figure out how much it will cost you to pay the interest on it. A good rule of thumb is that if you owe the IRS less than $300 and you plan on paying it off within the year, this is a good option.

Between $300 and $1,000: Take Out a Loan

You could consider taking out a personal loan, but make sure you are getting it from a good source such as a credit union, which can give you a loan at about 11%. This is a good choice if what you owe to the IRS is less than $1,000 and you’re planning on paying it back within the year. You’ll pay about $88 a month to pay it off over a year, adding up to $56 in interest.

More Than $1,000: Set Up an Installment Plan

The IRS will charge you a fee for setting up an installment program, so we only recommend this if you owe more than $1,000 or so. If you do a direct debit agreement, where regular amounts are transferred directly from your financial institution, the fee is $52. If you do a standard agreement or payroll deduction, the fee is $105. Or, if your income is below a certain threshold based on the federal poverty guidelines, it will cost you $43. You’ll have to apply to qualify for the reduced fee.

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If you owe less than $25,000 in combined tax, penalties and interest, you can sign up for an installment program online here or complete and mail Form 9465, which is an installment agreement request. If you owe more than that, call the phone number on your bill or notice to set up the program, and you will also need to complete Form 433-F, Collection Information Statement.

If You Can’t Pay at All

If you are unable to pay the IRS at all for what you owe, you may request a temporary delay in the collections process or apply for an Offer in Compromise. You can only use these options if there is doubt as to whether the amount you owe is correct, what you owe is larger than your assets and future income together or you are currently suffering economic hardship. Call the IRS using the number on your bill to talk to a representative about doing this, or find all the forms here.

Whatever your situation, don’t ever just ignore your tax bill!  Contact the IRS right away so that you don’t get nailed with big penalties on top of what is owed, and you’ll have one less stress in your life!

UPDATE: An earlier version of this story stated that you have 120 days to pay “before an IRS agent knocks on your door.” We have updated the article to make it clear that you only have an additional 120 days to pay if you request an extension and it is granted. Additionally, no one will literally knock on your door if you don’t pay—the IRS will send you a notice and begin the collections process.

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  • Formerlyirs

    I was a  Revenue Officer (COLLECTIONS DIVISION) with the IRS for 35 years before I recently retired. A Revenue Officer does NOT knock on your door 120 days after you file. There are notices that go out to you and you have plenty of time to take care of busiiness. If you have any questions, please feel free to email me at

    • Anonymous

      Hi Formerlyirs, 
      While we didn’t mean that literally an officer would knock on your door, we see where the confusion might lie. We’ve updated the article to make it more clear that the IRS will send a notice and start the collections process, not have an in-person visit.
      Thank you for your comment!

    • Ladydawn981

       I have a problem that maybe you can give some advice on. I  filed bankcrupsy in 2008 and lost my job in 2008. I have been paying the trustee to pay off my creditors and old IRS depts since 2008 and I have about a year and a half left (about $3,200/mo)
      I am filed for 2009,2020,2011 taxes and have not been able to pay due to my banckrupsy. with 3/4 of 2012 not paid ,I owe about $80,000.I am making my quarterly payments now and will continue to make them.
       I got new job making $150,000 and I have secured work for the next 2 years.I have $15,000 in the bank.
       My wife is sick with AIDS. My house and cars are underwater and I have no assets. there is a federal lien on my home.
       Noone will lend me money.What do I do? my lawyer say that I cant put new dept. into my current bankrupsey. I want to get everone paid. I really need some advice.Thanks-Eddie


    The IRS recently promulgated
    an internal directive at the behest of the Obama administration. It
    mandates greater scrutiny vis-a-vis individual, partnership, and
    corporate returns filed by entities residing in Republican-held
    congressional districts.