If your inability to pay the taxes you owe is simply a short-term incoming cash problem, and you'll have the funds to make the payment in a few weeks or months, the solution is very simple. Pay as much as you can afford when you file your tax return. That payments will help reduce the penalties and interest you'll be charged.
In about 45 days, the IRS will send you a bill for the remaining balance due. If you can pay it then, great... do it. If you can't, then send as much as possible (again, reducing penalties and interest) and hang on. In another 45 days you'll get another bill from Uncle Sam. Hopefully you can then pay the balance due.
You'll likely be able to go through two or three of these billing cycles before the IRS bugs you for some type of formal payment method. But, if you can clear up the matter using bigger chunks of payments over two or three IRS billing cycles, you'll pay some interest and penalties, but you'll save some time by not being required to complete any additional IRS paperwork. But be advised: That decision will cost you interest on the unpaid balance plus a late payment penalty of 0.5% monthly.
Borrow
As I discussed above, try to put the bite on your friends or family. Seriously. If you can pay the entire amount with funds that you've borrowed from friends or relatives, you'll reduce the penalties and interest you'll owe Uncle Sam, and without any high interest rates. I'm sure you'll find making payments to friends or family a much more pleasant experience than making payments to the folks at the IRS.
If the friends or family solution doesn't work out, consider a bank loan. Again, paying your banker is generally preferable to making payments to the IRS over a period of time.
Pay By Credit Card
Remember that you can always go the credit card route. As an alternative to paying by check, the IRS (and many states) will gladly accept payment by credit card. We generally don't recommend credit card payments, because the fees and interest rates associated with this type of payment are pretty high, but paying your taxes out of your own pocket could hurt you or your business in the long run. Sometimes you have to do what is best for you family or your business regardless of the interest rates. You can use any type of credit card expect Visa to make these payments.
Installment Agreement
If you're still reading it's possible that none of the above solutions will work for you. If that's the case you still have several option left. You should consider a formal installment agreement with the IRS. But now you're talking about dealing with the IRS directly, and possibly completing some additional forms and paperwork.
Generally, the IRS will accept an installment agreement if the tax owed is less than $25,000 and the balance due will be paid within five years. You'll be required to pay a "user fee" (currently about $43) to obtain the installment agreement, and you'll still get hit with late payment penalties of 0.25% monthly. But an installment agreement is still better than ignoring your obligation to Uncle Sammy.
If you think an installment agreement is for you then make your request on IRS Form 9465 (Installment Agreement Request). The form is available on the IRS website. You can file this form separately or you can simply attach it to your tax return (that you'll want to file by the normal mid-April deadline). The form is only one page long and requires a minimal amount of information, although the IRS could request more information from you down the road.
Extension to Pay
If all else fails you can request a six month extension of time to pay your taxes. But this extension will only be granted if the payment will cause undue hardship on you or your family. Don't confuse the term "undue hardship" with "inconvenience." You will have to prove that you can't sell assets or borrow to pay your taxes except under terms that would cause severe loss and undue hardship.
As with the installment agreement, you'll be required to file additional documents. You'll have to provide statements of assets, liabilities, income, and expenses for three months preceding the filing due date. You can use IRS Form 1127 (also available at the IRS website) should you find that you might qualify for an extension of time to pay your taxes.
