How to Pay Taxes When You're Broke
- 1). Determine if you need more time to pay taxes, if you need to pay in installments, or if you cannot pay at all.
- 2). File tax returns on time, even if you don't have money to pay. You will be penalized 5 percent a month for late tax returns, and 0.5 percent a month for not paying on time.
- 3). Fill out an extension form (Form 4868) by April 15 (April 17 in 2000) if you need more time. The IRS will give you an automatic extension until August 15.
- 4). Estimate the amount you expect to owe and pay whatever you can.
- 5). File Form 2688 by August 15 if you still need more time. The IRS may grant you an additional two-month extension.
- 6). File an Installment Agreement Request (Form 9465) if you don't have enough money to pay your taxes. Indicate how much you can afford each month and when you will pay.
- 7). Prepare an Offer in Compromise if you know you'll never be able to pay off your large tax bill. Offer to pay a lesser amount to settle the bill immediately.
