How to Talk to an IRS Agent When You’re Ridiculously Broke and Owe Taxes

How to Talk to an IRS Agent When You’re Ridiculously Broke and Owe Taxes
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How’s this for a nightmare tax scenario?

You’ve completed all the tax forms and worksheets, you’ve finished the math and triple-checked the numbers.

And those numbers say you owe the government money, but you’re broke and can’t pay.

For some people, this situation is more than a bad dream -- it’s a reality.

If this is happening to you right now, I have two words: Don’t panic.

You’re not the first person in the history of the federal taxation program who can’t pay their bill, and you won’t be the last.

The IRS has processes in place to help you through your situation, but you must remember one thing.

Ignoring your tax bill won’t make it go away; it will only make the problem worse.

Can’t Pay? The IRS Wants to Help

Despite its reputation as a bunch of scary suits with dark sunglasses and sharp pencils, IRS workers are a nice bunch. I’ve talked with them a lot, and they’ve been friendly, helpful and accommodating each time.

They even have a sense of humor.

When you discover you can’t pay your tax bill, you’ll probably end up on the phone with an IRS agent at least once, but don’t let it stress you out. Agents have heard everything and are trained to help.

Your Repayment Options

Every situation is different, so you should speak with the IRS or a tax professional about what tax bill repayment arrangement is best for you.

Some options include:

Online Payment Agreement

To qualify for this monthly payment option, you must owe less than $50,000 and have filed all your required tax forms. Apply online to receive an immediate decision.

If the IRS approves your request, it’ll charge you a one-time setup fee of up to $225, depending on your income and method of repayment.

Installment Plan

If you don’t qualify for the online payment agreement, you can still pay your bill in installments. Start the process by filling out Form 9465 and Form 433-F, and mailing them to the IRS. An agent will get in touch with you to let you know what to do next.

Offer In Compromise

If you can’t afford to pay anything toward your outstanding balance, apply for an offer in compromise (OIC) to see if you can settle for less than you owe. You’ll need to fill out a Form 656 and pay a $186 application fee to get the ball rolling.

Things to Keep in Mind

  • You won’t get any future tax refunds until you pay off your tax bill.
  • Make sure you make at least the minimum payment you’ve agreed to each month.  
  • If you need to negotiate a lower payment because circumstances changed, call the IRS to let an agent know. Don’t simply stop paying the bill.
  • Figure out how you ended up owing taxes in the first place so you can take corrective action. You don’t want to compound the issue by owing more taxes the following year.

I know, the idea of contacting the IRS when you owe money is terrifying, but don’t put it off. Your willingness to take care of your responsibilities will go a long way toward how willing the IRS is to work with you to find a solution that fits your budget.

Make that call today: 1-800-829-1040.

Your Turn: Have you ever owed the IRS money? How easy or difficult was it to work with the IRS?

Lisa McGreevy is a staff writer at The Penny Hoarder. She likes bringing you this information, but she is not a tax preparer, and this is not legal tax advice.