(NewsNation) — As tax day approaches, you may be wondering what options you have if you’re worried that you can’t afford to pay your taxes.
Don’t panic. According to the IRS, you may qualify for an online payment plan that allows you to pay off an outstanding balance over time.
Apply for a payment plan through the IRS
Everyone’s tax situation is different, which will ultimately determine if payment plan options are available to you. To apply for one, you’ll likely need your bank routing and account numbers on hand.
If the IRS approves your online payment plan, a setup fee may apply depending on your income. Once you’ve applied, you’ll receive immediate notification of whether your payment plan has been approved without having to call or write to the IRS.
- Short-term payment plan – The payment period is 120 days or less and the total amount owed is less than $100,000 in combined tax, penalties and interest.
- Long-term payment plan – The payment period is longer than 120 days, paid in monthly payments, and the amount owed is less than $50,000 in combined tax, penalties and interest.
Offer in Compromise through IRS
The IRS also has the option of applying for an offer in compromise (OIC), which is a request to settle your bill for less than what you owe. The IRS will consider many factors when deciding to approve your application, including:
- Your ability to pay
- Your income
- Your expenses
- Your asset equity
You can fill out the Offer in Compromise Pre-Qualifier Tool to see if you would potentially qualify for an OIC.
According to the IRS’s most recent data, only around one-third of the 36,000 OICs submitted in 2022 were accepted, making approvals rare.
Take out a personal loan
An alternative to IRS payment plans is taking out a personal loan, which CNBC recommends considering. Be sure to compare rates and fees with what you would pay through an IRS installment plan.
Avant Personal Loans is a good choice if have poor credit, since it accepts borrowers with credit scores as low as 580. Loans are capped at $35,000, and you’ll have 12 to 60 months to repay the loan with an APR that ranges from 9.95% to 35.99%.