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