What happens if you can't afford to pay income tax?

Answer 1

Some official type answers are below. And they are all reasonable options. Realistically, the obligation isn't going to just go away...and the IRS carries a big stick if you will. Gotta deal with it...but, as noted, and as many have found...they'll work with you. References are to publications and such on the www.irs.gov website.

I am unable to pay my delinquent taxes. Will the IRS accept an Offer in Compromise? You may qualify for an Offer in Compromise if you are unable to pay your taxes in full or if you are facing severe or unusual economic hardship. Refer to Tax Topic 204, Offers in Compromise, for additional information.

Is there any special assistance available on unresolved tax matters which are creating a hardship? If you are suffering, or about to suffer a significant hardship because of the way Internal Revenue laws are being carried out, you may ask for special help from the IRS' Taxpayer Advocate Program. The Taxpayer Advocate represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. You can reach that office by dialing (877) 777-4778. References: * Tax Topic 104, Taxpayer Advocate Service - Help for Problem Situations Can I make installment payments on the amount I owe? Yes. If you cannot pay the full amount due as shown on your return, you can ask to make monthly installment payments. However, you will be charged a one time user fee of $105.00, as well as interest on any tax not paid by its due date, and you can be charged a late payment penalty unless you can show reasonable cause for not paying the tax by the due date (April 15, 2008 for individual income tax returns) even if your request to pay in installments is granted. Penalty will be charged until it reaches 25% of the original balance due and interest will be charged until the account is fully paid. Before requesting an installment agreement, you should consider less costly alternatives such as a bank loan. To request an installment agreement send Form 9465 (PDF), Installment Agreement Request, with your return or call (800) 829-1040. If you call you can also request a direct debit agreement or a payroll deduction agreement. You should receive a response within 30 days if you submit the form with your return. For more details on installment payments, refer to Tax Topic 202, What to do if You Can't Pay Your Tax, or Publication 594 (PDF), Understanding the Collection Process.