No need to stress over making sure all of your taxes are paid on time, for those who qualify you may be able to make payments on your taxes due. There are various options for payment of an outstanding federal income tax liability. Because your balance is subject to interest and a monthly late payment penalty, it is in your best interest to pay in full as soon as you can to minimize the additional charges. Penalties are also assessed for failure to file a tax return so you must file immediately even if you cannot pay you balance in full. If you cannot pay in full you should pay as much as possible to reduce the accrual of interest on your account.
You should consider financing the payment of your tax liability through loans, such as a home equity loan from a financial institution or a credit card cash advance. The interest rate and any applicable fees charged by a bank or credit card are usually lower than the combination of interest and penalties imposed by the Internal Revenue Code. If you cannot pay in full immediately, the IRS offers a short amount of additional time, up to 120 days, to pay in full. No fee will be charged for entering this type of payment arrangement.
Installment Agreements
An installment agreement would allow you to make a series of monthly payments over time. The IRS offers various options for making monthly payments such as:
Direct Debit from your bank account
Payroll Deduction from your employer
Payment via check or money order
Electronic Federal Tax Payment System (EFTPS)
Payment by credit card via phone or internet, or
Online Payment Agreement (OPA)
A one-time installment agreement fee of $105.00 will be changed when you enter into an installment agreement unless you choose to pay through a Direct Debit from your bank account, in which case the fee is $52.00. Taxpayers with income at or below 250% of the Department of Health and Human Services poverty guidelines can apply to pay a reduced user fee of $43.00.
The user fee for restructing or reinstating an established installment agreement is $45.00 regardless of income levels or method of payment.
If you can pay you balance in a shorter period of time, you can request a short amount of additional time, up to 120 days, to pay in full. This payment arrangement does not carry a fee. If you decide on entering into an installment agreement, your monthly payment should be based on your ability to pay and should be an amount that can be paid each month to avoid defaulting.
If you are not able to provide full payment when you file your tax return, you can request a pre-assessment installment agreement on current tax liabilities
If you are not able to provide full payment after you have filed you tax return and received a bill from the IRS ( a balance due notice), you can request an installment agreement
You may also request an installment agreement by calling the toll-free number on the bill
You will need to specify the amount you can pay and the day (1st-28th) you wish to make your payment each month. The IRS will expect to receive the payment ON the day you indicate so be sure to figure mailing time into the date you select. The IRS will respond to your request, usually within 30 days, to advise you as to whether your request has been approved, denied or more information is needed.
Direct debit or payroll deduction installment agreements provide an opportunity to make timely payments automatically and reduce the possibility of default. For a direct debit installment agreement you will need to provide your checking account number and your bank routing number to initiate the automated withdrawal of the payment.
You may contact the IRS by phone or in person, oryou may submit submit an Installment Agreement Request Form through the mail. The form has space for you to write in your checking account number and your bank routing number, or you may staple a voided check to the form.
To intiate a payroll deduction installment agreement, you need to submit a Payroll Deduction Agreement Form and must be completed by your employer. The IRS will set up a regular installment agreement for you and convert it to a payroll deduction agreement upon receipt of the completed form from your employer.
Responding to you IRS Notice
It is always important not to ignore an IRS notice. If you do not pay you tax liability in full or make an alternative payment arrangement, the IRS is entitled to take collection action. If you are unable to make any payments at this time, please have financial information available.
