It is tax season, and you owe thousands to the Internal Revenue Service. But you cannot pay.
Now what?
"The key element is proactivity," says Lance D. Christensen, a certified public account and partner with Margolin, Winer & Evens, a CPA and business advisory firm in Garden City, Long Island.
"Be proactive in filing for an extension. Be proactive in communicating your inability to pay. If the collections unit of the IRS reaches out to you first, things can get ugly."
No matter how much you owe, throwing in a portion of your payment immediately "as a peace offering" is your best option, says Bill Farmer, an enrolled agent in Lexington, Kentucky.
(An enrolled agent is a person who is able to represent taxpayers before the IRS.)
Farmer calls this an unofficial payment plan. "If you owe a big balance on the due date, send the IRS about 40 percent of what you owe," he says.
In about six weeks, you will get a letter explaining the full balance of what you owed and that you only paid part of your bill. If you have the balance by then, write the check. If you do not have the balance, send as much as you can, he advises.
Delaying payment can only last for so long, though. And it only works if you owe less than $25,000.
If you owe more than that, you will need to do whatever possible to reduce your outstanding balance to that sum, then go on a payment plan that will give you up to 60 months to repay, using Form 9465.
Setting up a payment plan is easy, although it requires an origination fee of $120. If what you owe can be paid off within the next four months, says Farmer, call the IRS and request that time to pay in full.