Nine Tips for Taxpayers Who Owe Money to the IRS

Ron Cohen, CPA, MST By Ron Cohen, CPA, MST
Greenstein, Rogoff, Olsen & Co., LLP
Posted: 9/8/10

Clients and potential clients often ask: What are my options if I owe the IRS money?

The IRS list below is an excellent summary of your options.

I add that many people know they are behind on their taxes but have yet to file a tax return for the year (or years) in question, and don’t really know how much they owe. The first step in any process with the IRS is to file any unfiled, late tax returns. The entire IRS system depends on people filing a return and declaring what they owe. The IRS will refuse to enter into any agreement unless a tax return is filed. After, about 2 years of non-filing, the IRS will come up with a “substitute” tax return based on the information they have. This return is always wrong, and the tax is usually too high, but the IRS starts trying to collect the tax on the substitute return when the taxpayer ignores requests to file a return. So, if you are being billed for a substitute return, file your real tax return immediately and both the IRS and California Franchise Tax Board will usually set aside the substitute return for the real return… and will then work with you on collecting the tax as discussed below.


The Franchise Tax Board with the State of California, has a very similar process.

Feel free to call us at (510) 797 8661 with any questions regarding these issues.

Nine Tips for Taxpayers Who Owe Money to the IRS

Did you end up owing taxes this year? The vast majority of Americans get a tax refund from the IRS each spring, but those who receive a bill may not know that the IRS has a number of ways for people to pay. Here are nine tips for taxpayers who owe money to the IRS.

  1. If you get a bill this summer for late taxes, you are expected to promptly pay the tax owed including any penalties and interest. If you are unable to pay the amount due, it is often in your best interest to get a loan to pay the bill in full rather than to make installment payments to the IRS.

  2. You can also pay the bill with your credit card. The interest rate on a credit card or bank loan may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. To pay by credit card contact one of the following processing companies: Official Payments Corporation at 888-UPAY-TAX (also or Link2Gov at 888-PAY-1040 (also or RBS WorldPay, Inc at 888-9PAY-TAX (also

  3. You can pay the balance owed by electronic funds transfer, check, money order, cashier’s check or cash. To pay using electronic funds transfer you can take advantage of the Electronic Federal Tax Payment System by calling 800-555-4477 or online at

  4. An installment agreement may be requested if you cannot pay the liability in full. This is an agreement between you and the IRS to pay the amount due in monthly installment payments. You must first file all returns that are required and be current with estimated tax payments.

  5. If you owe $25,000 or less in combined tax, penalties and interest, you can request an installment agreement using the Online Payment Agreement application at

  6. You can also complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill in the envelope that you have received from the IRS. The IRS will inform you usually within 30 days whether your request is approved, denied, or if additional information is needed. If the amount you owe is $25,000 or less, provide the highest monthly amount you can pay with your request.

  7. You may still qualify for an installment agreement if you owe more than $25,000, but a Form 433F, Collection Information Statement, is required to be completed before an installment agreement can be considered. If your balance is over $25,000, consider your financial situation and propose the highest amount possible, as that is how the IRS will arrive at your payment amount based upon your financial information.

  8. If an agreement is approved, a one-time user fee will be charged. The user fee for a new agreement is $105 or $52 for agreements where payments are deducted directly from your bank account. For eligible individuals with incomes at or below certain levels, a reduced fee of $43 will be charged.

  9. Taxpayers who have a balance due, may want to consider changing their W-4, Employee’s Withholding Allowance Certificate, with their employer. There is a withholding calculator available on to help taxpayers determine the amount that should be withheld.

For more information about installment agreements and other payment options visit IRS Publications 594, The IRS Collection Process and 966, Electronic Choices to Pay All Your Federal Taxes also provide additional information regarding your payment options. These publications and Form 9465 can be obtained from or by calling 800-TAX-FORM (800-829-3676).


  • Publication 594, The IRS Collection Process (PDF)
  • Publication 966, Electronic Choices to Pay All Your Federal Taxes (PDF)
  • Form 9465, Installment Agreement (PDF)

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