Nobody likes paying the IRS, and it is even less appealing when you receive an unexpected bill from them. However, there are a number of ways that the IRS will accept payment.
Here are eight tips for those who owe federal taxes.
1. Tax bill payments. If you get a bill from the IRS this summer, you should contact your tax provider as soon as possible. They can help you determine whether you owe the money and discuss payment options with you. Ultimately, you can pay by check, money order, cashier’s check or cash. If you cannot pay it all, consider getting a loan to pay the bill in full. The interest rate for a loan may be less than the interest and penalties the IRS must charge by law.
2. Electronic Funds Transfer. It’s easy to pay your tax bill by electronic funds transfer. Just visit IRS.gov and use the Electronic Federal Tax Payment System. You may also use EFTPS to pay your taxes by phone at 800-555-4477.
3. Credit or debit card payments. You can also pay your tax bill with a credit or debit card. Even though the card company may charge an extra fee for a tax payment, the costs of using a credit or debit card may be less than the cost of an IRS payment plan. To pay by credit or debit card, contact one of the processing companies listed at IRS.gov.
4. More time to pay. You may qualify for a short-term agreement to pay your taxes. This may apply if you can fully pay your taxes in 120 days or less. The professionals in our office can assist you if you need to set up one of these agreements. There is generally no set-up fee for a short-term agreement.
5. Installment Agreement. If you can’t pay in full at one time and can’t get a loan, you may want to apply for a monthly payment plan. Again, we can assist you. It’s a relatively quick and easy process. If approved, IRS will notify you immediately. You can arrange to make your payments by direct debit. This type of payment plan helps avoid missed payments and may help avoid a tax lien that would damage your credit. For approved payment plans the one-time user fee is $105 for standard and payroll deduction agreements. The direct debit agreement fee is $52. The fee is $43 if your income is below a certain level.
6. Offer in Compromise. The IRS Offer-in-Compromise program allows you to settle your tax debt for less than the full amount you owe. An OIC may be an option if you can’t fully pay your taxes through an installment agreement or other payment alternative. The IRS may accept an OIC if the amount offered represents the most IRS can expect to collect within a reasonable time.
7. Fresh Start. If you’re struggling to pay your taxes, the IRS Fresh Start initiative may help you. Fresh Start makes it easier for individual and small business taxpayers to pay back taxes and avoid tax liens.
8. Check withholding. You may be able to avoid owing taxes in future years by increasing the taxes your employer withholds from your pay. To do this, please discuss it with us.
The professionals in our office can help you with your tax planning needs. Call us today.