Tax Cat: Help! I Owe The IRS Money And I Don't Have Any!

The IRS knows you owe them money and they realize that you may not actually have any to give them. Don’t worry, they’re not going to come in the night and steal all your Nerf footballs and catnip.

Here’s what to do when you owe the IRS and don’t have any money:

Taxpayers should file their return on time, pay as much as they can with their return and use IRS.gov if they need to request a payment agreement.

Interest and penalties add up for people who don’t file and pay on time. But taxpayers can limit these charges by filing on time and paying sooner.

Though interest, currently at the rate of 6 percent per year and late payment penalties, normally 0.5 percent (1/2 of 1 percent) per month, apply to any tax paid after the April 15 deadline, taxpayers can limit these charges by paying sooner. In addition, by filing on time, a taxpayer avoids the much larger 5-percent-per-month late-filing penalty. For example, a taxpayer who files on May 1, owing $1,000 in tax, would be charged interest plus a $50 penalty.

So remember, if you owe money and can’t pay it–file your taxes on time anyway and use the IRS’s online payment agreement calculator. By entering some basic information about your tax situation, eligible taxpayers can set up either a short-term payment extension or a monthly payment plan.

A short-term extension gives a taxpayer up to 120 days to pay. No fee is charged, but the late-payment penalty plus interest will apply.

If you owe less than $25,000 and would like to know whether or not you qualify for a payment agreement, click here


Online Payment Agreement (OPA) Application
[IRS]

(Photo:Chad Beckerman)
taxcat2.jpg

Comments

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  1. ConsumptionJunkie says:

    I LOVE Tax Cat! He/She is SOOOOOO cute!

  2. ucdcsteve says:

    Tax Cat owes money because he wasted it all on extended warranties and Monster Cables. Tax Dog did not fall for that.

  3. ConsumptionJunkie says:

    I LOVE Tax Cat! He/She is SOOOOO cute!

  4. Dobernala says:

    bring back Tax Dog!

  5. r081984 says:

    @Dobernala:
    Everyone knows that dogs cannot do taxes.

  6. trujunglist says:

    Tax Dog is an employee of The Conglomerist, and had to be put down.. err, i mean laid off, laid off.. yeah.

  7. humphrmi says:

    I once owed IRS some back taxes. It was a very small amount – around $1000 – so the big tax legal mills didn’t want to touch it because they work on contingency. I called the IRS myself and cut a deal to pay the thousand bucks back over time without any interest or penalty charges at all.

    The secret to keep in mind – they want to recover whatever they can. If you call and offer them something reasonable, they won’t say no.

  8. MeOhMy says:

    I just love how they sit on W2 workers’ overages without paying interest but expect to be paid interest and penalites when someone pays late…

  9. @humphrmi: I can attest that this is key. The IRS just wants their money, and the interest and penalties they charge are to encourage folks to pay, not to earn money (like credit cards).

    My elderly parents owed (in the 5 digits), but they were so overwhelmed by the amount they froze and buried their heads in the sand. I guess they thought had to pay it all at once. It was only after I got nosy about their finances that I discovered the bill. Fortunately, I was able to arrange payments without fees, penalties, or interest.

    I can tell you, they were a lot more understanding than any other creditor I’ve ever dealt with.

  10. 00exmachina says:

    @Troy F.: That’s because you can adjust your withholding to prevent the overage.

  11. clearly this headline should read “Tax Cat: Help! I Owe The IRS _Monez_ And I Don’t _Haz_ Any!

  12. @Troy F.: Word. That’s why send them money once a year on 4/15… AFTER I figure out how much I owe, if I owe at all.

  13. BloggyMcBlogBlog says:

    @r081984: I resent that.

  14. gamehendge2000 says:

    @00exmachina:

    Not necessarily.

    If pay taxes up to the Soc Sec limit, and then switch jobs during the tax year, they just keep on deducting more Soc Sec tax.

    Nothing you can do to prevent it.

  15. amejr999 says:

    you can also call your local taxpayer advocate’s office… they’re quite good about working things out.

    [www.irs.gov]

  16. Bladefist says:

    this is our government. We want to help you, we want to give you healthcare, better education. After you pay us though. Always wanting to help you, unless its tax time, then they’ll help you by charging you fees, and interest to pay them.

    I don’t have a better solution, just noting, the only thing they can do to help you, is collect less. If you had your property taxes back, and lower income taxes, you’d be able to pay your taxes. We’ll wait and see the numbers, I’m guessing a lot of people are going to be hurting.

    I get angry about our tax system. I get angry that our government acts like the mafia.

  17. howie_in_az says:

    6% interest eh? What if you didn’t file for a year and are just filing now, and the gubment owes you big time? Does the gubment give you that 6% in interest or do they not do anything for you?

  18. Erskine says:

    I wonder if taxcat will get his $600 relief check…

  19. kelptocratic says:

    @Erskine: He’ll just blow it on catnip and cheap hookers anyway.

  20. cde says:

    Tax cat sez…. Human hands make wonderful ties…

  21. XTC46 says:

    @howie_in_az: why should the goverment pay you extra for not filing for your returns. You are the one who tells them how much to take in the begining, so its your fault if they take way too much.

  22. high_and_dry says:

    I talked to an IRS agent yesterday about this very situation. He said to set up a payment plan will be a fee of an extra $125 or so. He said that, depending on how much you owe, the best plan was to file on time and send what your can or wait until they bill you – it takes about 3 weeks to process your return. Then, apply for an extension of time to pay balance (120 days). He said there are no fees for the extension and it is more cost-efficient for a person low on funds to pay taxes to go this route unless, of course, 120 days isn’t enough in comparison to the amount owed.

  23. ThomasD3 says:

    I’ve had experience with the IRS and frankly I have yet to see any institution that is as professional, organized and accomodating as them.

    @BladeFist: yes, they take our money, etc, but at least you deal with functional people. Trying to solve a problem with BoA is hell in comparison.

    Putting the tax system on trial is another story; taxes suck, but I’m sure you enjoy roads to drive on as well as the electricity/gaz/phone/internet infrastructure.

  24. littlemoose says:

    Man, my kitten won’t do my taxes. Where can I get a Tax Cat?

  25. cronick says:

    One time many years ago when I first started my business my accountant advised me, rightly so, that “it’s cheaper to borrow money (you owe) from the government than to borrow it from a bank or a credit card.”

    In point of fact, if your bank charges you 9% to rent money and your credit card charges you 18% to rent money, you are much better off paying off the credit cards and the bank first because the IRS is only charging 6% or so to, in effect, borrow money (or pay over time).

    Of course now, I try to never, ever pay interest to anybody.

  26. mgy says:

    When I finally made enough money one year to actually have to pay taxes, they hit me with a $500 bill. I paid 15 days late and ended up having to pay $700. Don’t ask me where the numbers came from – I just did what the gubmint said to.

  27. impetus says:

    Hopefully someday within Tax Cat’s lifetime, we’ll do the right thing and abolish income taxes and the IRS so he can be the happy kitty he was meant to be.

  28. katylostherart says:

    i also recommend not waiting for them to send you the invoice. generally you should send it 5 days before you know it’s due because they’re the gov’t and will obviously screw you over given the chance. i’m on a payment plan with the irs right now and sometimes i don’t get their invoice/notice until the day before it’s due in. write down the local address as well because otherwise they tell you to send it to like ohio instead of where it normally goes.

  29. RBecho says:

    Everyone complains that the IRS gets a free loan because too much is withdrawn from check. You know what? YOU PICKED THE AMOUNT TO WITHDRAW!!!

    Quit complaining and adjust your deduction level. And for those of you saying the IRS charges 6%, that is after 4 and a half months (only starts in April) of zero interest.

    In short, quit your bitching and watch your deduction level, as it was your choice in how much the US deducts.

  30. teh says:

    @howie_in_az: If you made a mistake and file a correction, then yes, the government will pay the difference plus interest.

  31. Crazytree says:

    rule #1: don’t spend the IRS’s money on that new Coach purse.

  32. katylostherart says:

    @RBecho: unless of course you just get a 1099 at the end of the year…

    also, i can say no deductions of any sort and get a rebate, or i can say 1 deduction for me and owe in april. the gov’t never really nails it spot on and making an incorrect guess isn’t something you should fault someone for. we’re not all accountants and we can’t afford to consult one every time we fill out a tax form. going through those tax guides that the irs gives out free are ridiculous as well. they’re not set up so someone with little to no idea about the inner workings of the irs (which is what the average person has) can actually figure it out ahead of time.

    it makes no sense to expect everyone to get a zero balance due/credited at the end of every year. most things cannot be accounted for perfectly.

  33. MoreIceCream says:

    And remember, filing an extention is not an extention of time to pay. You still have to pay what you think you owe by 4/15 with your extention.

  34. MoreIceCream says:

    @howie_in_az: I think the IRS and government view this as a free loan to them. You could have gotten the money by filing and they are not responsible for any of you not filing on time.

  35. spinachdip says:

    @katylostherart: Oh man, the 1099s. I’m glad I don’t freelance (as much) any more.

    I know I should be putting money for taxes aside anyway, but there’s something to be said for letting the IRS take a little too much up front so I don’t have to worry about it.

    Plus, the pain of losing something is like 4 times greater than the joy of gaining something of the same value. To that extent, I’d rather let IRS have the money before I even see it than to have to write a check in April and watch my bank balance drop.

    So at least for me, whatever the opportunity cost of letting the fed sit on my money sans interest is worth it.

  36. m4ximusprim3 says:

    I wonder if tax dog belongs to chad steelgate.

    Also, I wonder if Tax Cat could beat up tax dog, or if tax dog would tree him and slobber a lot.

  37. JustAGuy2 says:

    @gamehendge2000:

    You can’t prevent that, but you can add some exemptions on your new W4 so that your underpayment of income tax offsets your overpayment of socsec.

  38. ConsumptionJunkie says:

    Tax Cat Sez…

    im in yur taxas

    attractin yur auditz

  39. @RBecho: I think that’s what people were saying they do. simma down now.

  40. President Beeblebrox says:

    @full.tang.halo: I can haz tax penaltiez and interests?

  41. btrotta says:

    The key with the IRS is to file your return on time, and if you owe them money you can’t pay, send a letter with your tax return spelling out how much you owe and how much you can afford to pay each month.

    I’ve had the misfortune of being in that position several times, and each time the IRS accepted my proposal and I made the payments as planned and was never charged any interest or penalties. I was always able to pay off the debt by the next filing deadline, so I’m not sure what would happen if you had to pay for more than a year.

  42. Aladdyn says:

    Once I didnt file a tax return or pay any taxes until a year after I was supposed too. I think they charged me 700+ in interest and fines. I just wrote a quick letter admitting it was my fault that I had not payed in time and asked if there was anyway they could reduce the fines/interest. I soon got a letter back and they took off about 500 or so, saying it was a onetime reduction based on my timely payments in the past. IRS seems fairly reasonable to me.

  43. scoosdad says:

    @teh: And apparently if you have a refund coming, say for tax year 2006, and you opt to apply it in advance toward taxes due for tax year 2007, you get interest on that money too. In January this year I got a statement from the IRS telling me that I needed to claim about $15 in additional taxable interest income on my tax year 2007 return because of interest they paid on a pre-payment I elected when I filed my 2006 return. I have some additional income paid to me during the year that doesn’t have taxes withheld until I pay them myself, so I decided to apply that money towards the tax on that anticipated income.

    I don’t know where that interest money is right now (the form they sent didn’t say) but I presume that maybe it will be added to the direct deposit refund I’ll receive for 2007. TaxCut (not TaxCat) was no help in figuring out how to make sure I got that $15 back from the IRS.

  44. hapless says:

    @RBecho: If you set your witholding too low, the IRS will kick your ass. You’ll end up having to adjust witholding quarterly and pay minimum amounts.

    Witholding is NOT optional.

  45. DXDawg says:

    @00exmachina:
    @RBecho:

    Although that is true and it’s certainly possible to adjust your withholdings to accomodate life changes or professional changes, it is simply not fair to expect the average American citizen to understand the 18,000 pages of tax code well enough to know how doing so will affect their 1) take-home pay and 2) aggregate amount due come April.

    I’m an HR professional with multiple college degrees; I am more familiar than most with withholdings and am higher educated than the majority of Americans. If I have to work to figure out the best way to handle my withholdings, I promise you that the guy driving the motor grader for the local city government has absolutely zero clue what any of that means and is completely at the mercy of the IRS.