What happens when you can’t pay what you owe?

April 13, 2015

Sometimes you file your taxes and end up with a nice refund. Sometimes you owe money. Sometimes, you can’t pay the full amount you owe right away.

Even if you suspect you owe more than you have on hand, there are some steps you can take to continue moving forward.

First, file your tax return by April 15 to start the process and determine the exact amount you owe.

Next, pay the full amount that you owe if possible. If you cannot pay the full amount, pay as much as you can when you file the tax return. Penalty and interest will be added to the unpaid amount; the more you pay upfront, the less you’ll have to pay in penalty and interest. Within a few weeks, a bill will be issued for the remaining amount due.

Send in your return without payment if you do not have the funds to pay anything towards it. In a few weeks, a bill will be sent for the tax, plus penalty and interest on the full amount due.

After you get the bill, you can set up a payment plan online or by contacting us using the address and phone number on the back of the bill. If you owe more than $100 and can pay 20 percent down, you qualify for a payment plan. (Businesses will qualify if they owe more than $500 and can pay at least 20 percent down.) Once approved, payments can be made by mail or online.

Remember, the key to saving money when you owe tax is to pay as much as possible, as soon as you can.

If you still need to file, visit www.freefile.dor.in.gov to see if you are eligible to file at no cost. The sooner you file, the sooner you can make a plan to stay ahead of tax payments.