A tax bill you cannot pay is one of the most stressful situations a taxpayer or business can face. The temptation is to ignore it and hope, which is the worst option, because penalties and interest grow every month. KRA allows taxpayers in difficulty to apply to pay in instalments. A well-prepared request, followed by disciplined payments, can stop the problem from becoming a crisis. The details of the process and the criteria can change, so confirm the current procedure with KRA.

Act before it gets worse

The best time to ask for a plan is as soon as you know you cannot pay. Penalties and interest add up month by month; see KRA penalties and interest explained and penalty and interest rates for late returns and payments. The longer you wait, the larger the debt and the weaker your position. Use the KRA penalty calculator to see how fast the amount grows.

File the returns first

KRA is unlikely to agree a plan if you have unfiled returns. The amount you owe must be known, and that requires up-to-date filings. If some returns are overdue, file them, even if you cannot pay the tax with them. A filed return with a balance is a manageable problem; an unfiled return is an open-ended one.

Know exactly what you owe

Get your statement of account from iTax and break the total into tax, penalty and interest by period. How to read your iTax ledger and statement of account shows how. Check for errors, such as payments not allocated to the right period, and correct them first. Do not agree to a plan on a figure that is wrong.

Work out what you can afford

Prepare a realistic budget. List your income and essential expenses and see what you can pay each month. Do not promise an amount you cannot sustain; a plan that fails is worse than a smaller plan that succeeds. The tax arrears and payment plan tracker records each instalment and shows the balance, and cash flow forecast for a small business helps you check affordability for a business.

Make the request

Apply through the channel KRA specifies, usually iTax or your tax office, and give the reasons for the difficulty, the amount you can pay now and the instalments you propose. Attach evidence, such as financial statements, bank statements or proof of hardship. Be honest and complete. A clear proposal with a down payment is more likely to be accepted than a vague plea.

Understand what you are agreeing

Read the terms carefully. Check the amount, the number of instalments, the due dates, whether penalties and interest continue to accrue and what happens if you miss a payment. Ask for the agreement in writing. Some plans require you to remain compliant with new filings and payments during the arrangement, which means current taxes must be paid on time as well.

Keep to the plan

Treat each instalment as a priority. Pay on or before the due date and keep the receipt. Record each payment and the remaining balance. Check your ledger after each payment to confirm it was allocated correctly. How to pay KRA taxes with M-Pesa, bank or a PRN explains how to use the right references.

If you cannot keep up

If your situation changes, contact KRA before you miss a payment and ask to revise the plan. Silence is what turns a manageable arrangement into enforcement. Keep copies of all your correspondence in the KRA correspondence and objections log.

Disputed amounts

If you believe part of the assessment is wrong, you may be able to object to that part while paying the undisputed amount. How to object to a KRA assessment and appeal and how to read a KRA assessment letter line by line explain how. Do not use an objection as a way to delay a debt you know is correct.

Avoid the problem next time

Once the debt is cleared, set aside money for tax as you earn it. For businesses, the instalment tax calculator shows what to pay during the year, and the tax provision and instalment forecast helps you plan. Building a habit of paying as you go ends the cycle of arrears.