If You Can't Pay The IRS - Your OPTIONS & IRS Payment Plan Explained

Introduction to tax debt watch from 0:00

This video will answer your question of, I can't pay my taxes to the IRS, what do I do? If you can't pay your taxes, listen up. I'm not making this video just for the sake of making a video. I genuinely and truly want to help you in this situation, because I know it's a bad problem to be in. So what I want to do is I want to bring clarity to any of the questions that you may have revolving around the situation, and I want to help you strategize a game plan so that you have the best course of action to take. And I also want to reveal to you the options that are available to you, and I want to make sure that you don't go down bad paths making costly mistakes that will cost you time and money.

And if you are here because you are a subscriber, thank you so much for supporting our channel. It really means a lot to me. And just know that I'm trying my best to answer as many questions in the comments, even during tax season, and just know that I give priority to answering questions and comments in my latest videos, and I'm also doing live streams as well. So thank you so much. If

Overview of payment options watch from 1:04

you can't pay your taxes, here your options available to you. Number one, do nothing. You know, it's not recommended that you go down this route; however, still an option for you. Option number two, file an extension for your tax return. That way that the IRS, they don't know that you owe money. However, you're gonna have to come up with the money soon, because your extensions gonna run out in six months. Option number three, file [your] tax return and request a short-term extension payments. This is where you are filing your return and you're telling them, hey, I can't pay now, but I can pay within 120 days in full.

If you can't do that, your fourth option is to create a full-blown payment plan. This option is an installment agreement that you pay back your balance due over the course of a certain amount of months or a certain amount of years. If you go down this path, this will not affect your credit score, because this activity is not reported to those credit agencies. And the last option is to do an offer in compromise. You may have heard of these on radio ads or television ads, where they say settle your tax debt for pennies on the dollar. And for the people

Penalties for not paying watch from 2:18

asking if there's a time limit for the IRS to collect their debt from you, there actually is. There's a ten year statute of limitations. However, you got to ask yourself if you want to play that game for ten years, if you want to feel like a fugitive for ten years. However, I'm not against it, because I actually have a client that's on year eight. They're almost there, they're almost at the finish line. Let's get back to reviewing your options. I understand that feeling of wanting to do nothing. I know that deep down side that you don't want to do nothing. It's just that being in this situation, it can make you feel paralyzed, because you probably only want to think about it just to maintain your sanity.

But the thing is that if you just keep procrastinating and doing nothing, you're just digging yourself a deeper hole with penalties. And just know that the penalty, it's based off your balance due. So the bigger your balance due, the bigger your problem. Whatever your balance due is, they're gonna charge you 5% of that a month for not filing. They're gonna charge you half a percentage point a month for not paying. And on top of all this, they're gonna charge you interest, just whatever the variable rate is at that time. I mean, that's just highway robbery rates if you add them all together. You need to snap

Filing an extension watch from 3:30

out of this state of paralysis. This is your wake-up call. You need to come to acceptance that [at] this point in your life, due to whatever circumstance, you simply cannot afford to pay your tax bill. After you've accepted that fact, then you can create a game plan and start moving forward. Here's an option for you. If you really don't want to go on a payment plan with the IRS, then you can file an extension for your tax return. Here's a scenario, this is what's happening in this scenario. It's April 15th, taxes are due April 15th. If you file your tax return, then the IRS will have your tax return, and they're gonna see, if this person owes us money, let's go after them.

Well, they know because you've filed your tax return. Here's another scenario. April 15th, you have taxes due, you can't pay it, so you do nothing. If you do that, you're gonna get hit with the failure to file penalty and the failure to pay penalty, and then sooner or later down the line you're gonna file your taxes, and you're gonna be subject to those penalties, and you're gonna have to face the music, and that's gonna suck. Here's the option that I would recommend in this scenario: file tech, file a tax return extension. If you do that, then at least you're going to avoid the failure to file penalty.

You're still gonna get hit with the failure to pay penalty, but at least you're avoiding the failure to file penalty, which is actually much more severe than the failure to pay penalty. And secondly, if you file a tax return extension, this is what's happening: you filed an extension, your tax return is not due until October 15th. That way, okay, you haven't filed your tax return. If you haven't filed your tax return and the IRS, they don't have your tax return, they can't see that you owe the money, so they're not gonna go after you, not until at least you file on October 15th. But if it's April 15th, you do this extension, you've got to come up with the money soon, at least by October 15th, because if you don't, then you're gonna be in the same boat.

You're gonna be in the same position on October 15th that you are on April 15th. So if you go this route, you kind of come up with the money soon. Another option is to file your

Short-term payment plans watch from 5:43

taxes and request a short-term extension payments. If you can't pay your taxes in full immediately, you can request 120 day extension to get that balance due you paid to the IRS. The good thing about this option is that there's no fee for this. However, the interest and penalties, they'll still continue to accrue and rack up until you get that paid. So do this, to set this up, it's very easy. Just go to the online payment agreements on the IRS website, or you can simply just give the IRS general hotline a call. And if you want to dig up their number, just google it. Just google IRS contact, and it'll pull up their IRS general hotline number. Your other option is to create a

Long-term installment plans watch from 6:23

payment plan with the IRS. This is a full-blown payment plan. You do so by completing Form 9465 and mailing it into them, or you can call them and just take care of this over the phone. Now here's the thing: they do charge you a fee for this, which is like kicking someone when they're down. They're gonna charge you $31, $149, based off your income levels. Now here's a word of advice. So you do have some power in dictating the terms of the payback period and how much that you're paying back per period, so how much every month. Make sure you make this an amount that you can actually pay back.

You don't want to default on this. The last thing I want to do is default on this and cause more problems. So that's just my advice. Within 30 days of doing this application process, you're gonna hear from them, and they're gonna say that it's approved, denied, or they want more information.

Tax debt settlement companies watch from 7:17

Another option, which I could ask frequently, hey, what's the deal with those radio ads or those TV ads that I hear, settle for pennies on the dollars, we're a tax debt settlement company? That's the one where the IRS, they write you off as uncollectible. So in certain circumstances, yes, they will write off the majority of your tax debt, and they'll take whatever they can get. Now you probably heard those commercials just saying, [do you owe] the IRS $10,000 or more, we'll give us a call, then well, we'll help you settle for pennies on the dollar. Here's what to expect. If you hire one of those companies, there's gonna be three scenarios.

You're either gonna hire a scam company, or you're gonna hire a company that actually is legitimately doing this and they just suck, or you're gonna hire a legitimate company that's actually very good. Here's what happens when you hire a scam company. The company, they're gonna promise you a team of experts: former IRS agents, tax attorneys, certified public accountants, enrolled agents, the works. And you're gonna be like, holy cow, this sounds like a dream team, this is an all-star team, and they're gonna help reduce my tax debt. They're gonna push around the IRS, they're gonna bully them around, these guys, they're experts, you know, this is my team.

You're so impressed that you paid that settlement fee, the initial fee that they request, and then you're just gonna wait and wait and wait, and nothing's gonna happen. You're not gonna hear from them. You're gonna get so fed up, you're gonna call the [company], and you're gonna hate what's going on, and then the general secretary, they're just gonna be like, oh, the case representative assigned to you, you know, they're processing your return, don't worry, everything's fine. And then that, that's just gonna keep repeating [unclear]. They're gonna go silent. They've basically scammed you. They're not gonna do anything. Now this is what

Reviewing settlement reviews watch from 8:58

you can expect if you hire a legitimate debt settlement company that sucks. Let me give you an example. Let's, so let's, let's go to Yelp. I'll show you. Let's go to Yelp. Let's look up a tax debt settlement company, tax debt settlements. Here it is, in Chicago. Let's see what it pulls up. Let's see. Okay, these guys, three out of five stars. Let's click on it. Let's see what they, let's see what the people are saying.

Offer in compromise explained watch from 9:28

Let's see, let's just scroll down to the bottom. Okay: great initial contact person, but no real results, paid seven hundred ninety five for nothing but the moral support. Really cool. I hire community tax maybe ten months ago, they charge me $700, looks like nothing happens. Well, been playing phone tag with community really for a year now. I've been playing phone tag. I will make this short: you'll be better off if you negotiate directly with the IRS. My experience is very unproductive. Okay, so you get the story. Don't be fooled. What they're gonna do is, they're gonna, they're gonna say, give me your W-2s, 1099s, your basic tax documents, and they're gonna say, we can put you on a payment plan with the IRS.

They're gonna give you paperwork to fill out, but that paperwork is downloaded directly from the IRS website. You could have done this yourself. Or they're gonna say, they're gonna give you some spiel, that a scripted message, and they're gonna say, due to our amazing negotiation skills, there's a chance that we can reduce your debt for pennies on the dollar. What they're referring to is to offer in compromise, which is what we've been talking about this whole time, the OIC. Basically, they're gonna put you in the OIC application process. However, to qualify for an OIC to have it executed, it's a very high hurdle, it's a very high bar.

I mean, the IRS, they're gonna examine your income, your expenses, your other, that's your ability to pay, your assets, including the equity in your home. And if you don't qualify and you find out you're rejected, guess what? The company, they're gonna charge you an application fee for, for attempting to do the OIC application. That's what they're really after. If you hire a legitimate tax debt settlement company that knows what they're doing, then chances are that they probably will be able to help you out, but however, at what cost? Just know that if they're going to just put you on a payment plan, you could have done that yourself directly with IRS, and you could have used that money that you pay the company to pay down your own debt with the IRS.

You know, honestly, if you're not gonna engage the tax settlement company for an OIC, I don't, I don't see the points, unless you're going to do the OIC and have it, or at least a high chance of getting it approved. I don't see no reason why you should be working with them. The OIC, it's a high hurdle, it's a high bar to cross over, it's [tough] to pass. Just know that generally you need to be willing to pay them and prove to them that this is as much money that you can afford and how much that they can expect to receive from you over a reasonable amount of time. I mean, if, if that's not the case, you're just wasting everyone's time and your own money trying to go out to this OIC. That's not gonna work. Thank you so much for

Conclusion and call to action watch from 12:44

tuning in with me on this one. I sincerely hope that this helps you create a game plan, move forward, and put this in your past. Please subscribe to our channel, ClearValue Tax. Thanks again, take care.