What are your tax repayment options?

April 3, 2019

Realizing that you might owe taxes this year can be overwhelming, but remember no matter what you need to file your taxes. By not filing on time, and by not paying taxes by the owed deadline you will be subject to penalties enforced by the Internal Revenue Service (IRS). If you are unable to pay taxes by the requested due date, you will owe a late fee and may be enforced penalties. 

No matter the tax bill, you always have options in terms of tax repayments. While they will greatly depend on your financial situation and tax owed, it’s important to discuss your options with your tax representative. Options might include: 

Request an Extension

If you can gather the money needed to pay your tax bill, it might be in your best interest to file for a six month extension. Six month extensions must be filed as soon as you are able through a tax professional or the IRS. If you wait too long to request a six month extension, then you will only be able to file for a 60 day extension. 

Monthly Payments

If you owe less than $50,000, you are able to request a monthly payment plan up to 72 months. If you file for a streamlined monthly payment, there is typically less paperwork, and no federal tax lien will be filed by the IRS. Streamlined agreements can be set up by calling the IRS, setting up an online payment agreement application, or using the tax professionals. 

Owing more than $50,000 or do not qualifying for a streamlined monthly payment can result in a complicated payment plan that is based on your “ability to pay.” A complicated payment plan requires you to submit documents the prove you are unable to pay the full amount requested from the IRS at once. Any tax owed that amounts to larger than $10,000 will result in the IRS filing a tax lien. If you are interested in filing for a complicated payment plan you will need to call, visit, or write the IRS to request one.

When making your monthly payments, pay at least the amount due and make all scheduled payments on time. It is important to stay in contact with the IRS, and when paying by check include important information such as name, address, social security number, and tax year. Always confirm your payment information and date prior to starting your monthly payments and be sure to send them to the correct address, the one listed in the correspondence with the IRS.

In general, you’ll pay approximately $50 for setting up a debit agreement with the IRS or $105 for setting up a standard/payroll deduction agreement. If you are unable to afford the fee, and are a lower-income taxpayer, you might be able to apply for a reduction in fees.  

Payment Deferment

In select cases, you might not be able to pay the IRS - and that is alright. If you are unable to pay the IRS you can request a CNC status, or currently not collectable status. This puts a “pause” on your tax bill collection until you financial situation becomes better.

However, there are a few caveats to a CNC status including the IRS checking back in every year on your financial situation and limiting your expenses to strictly those that are necessary. If you owe more than $10,000 the IRS will file a tax lien. As with the other payment arrangements, you will need to call, write, or visit the IRS in person to request a status.

Offer in Compromise

If there is no hope for improvement in your financial prospects, you can request something known as an offer in compromise (OIC). OICs are ways to settle debt owed to the IRS for less or for the full amount you owe. Qualifying for an OIC is rare, and you will only qualify if you can’t pay all the taxes you owe through your assets or a monthly payment plan. OICs are for those who are not temporarily distressed, but those who are unable to pay with no hopes of improvements. OICs must be accepted by the IRS and will depend on doubt as to liability, doubt as to collectibility and effective tax administration. OICs can be paid in a lump-sum payment, short-term payments and long-term payments. Contact Advanced Tax Solutions for IRS Offer in Compromise help in Denver. 

What about penalties and interest?

Tax bills can accrue penalties and interest just as other bills can. If you find yourself struggling with an unusual event, made a mistake or have illnesses in the family you can write a letter to the IRS requesting an “abatement.” Abatements are ways to reduce or remove penalties or interest. Late fees can be assessed on tax repayment when not paid by the due date. Generally, you may owe approximately 0.5% per month of taxes owed when you are overdue. However this may depend on what type of taxes you are paying back. 

You are able to remove penalties or qualify for relief from penalties through reasonable cause, first time abatement or statutory exception. Reasonable cause might include death or additional life-altering situations such as a severe illness. Where as statutory exception can be filed when you have received incorrect advice or instructions from the IRS. The first time penalty abatement can be utilized when it is the first time you have undergone a penalty or issue. 


Paying a tax bill can be a little overwhelming, but be sure not to use a credit card to pay debts or take out a high interest loan. High interest credit cards or loans can create more debt than you owe and cause greater problems. Also, it is important to avoid removing money from your retirement accounts to pay a tax bill - you have options.

Tax repayments will depend on your quick and timely action and your individual situation. The IRS might even recommend refinancing your home in situations where you are unable to pay your debt. If you are ever unsure of what your best option is, contact our Advanced Tax Solutions team today to learn how you can successfully navigate tax repayments. We are always here to help with any of your questions and requests.
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