Here are eight tips for those who owe federal taxes.
- Tax bill payments. If you get a bill
from the IRS this summer, you should pay it as soon as possible to save
money. 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.
- 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.
- 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.
- 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. You can request it through the Online Payment Agreement
application at IRS.gov. You may also call the IRS at the number listed
on the last notice you received. If you can’t find the notice, call
800-829-1040 for help. There is generally no set-up fee for a short-term
agreement.
- 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.
If you owe $50,000 or less, you can apply using the IRS Online Payment Agreement
application. It’s quick and easy. 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.
Taxpayers may also apply using IRS Form 9465, Installment Agreement Request. If you owe more than $50,000, you must also complete Form 433F, Collection Information Statement. 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.
- 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. Use the OIC Pre-Qualifier tool to see if you may be eligible before you apply. The tool will also direct you to other options if an OIC is not right for you.
- 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.
- 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, file a revised Form W-4, Employee’s
Withholding Allowance Certificate, with your employer. The IRS Withholding Calculator tool at IRS.gov can help you fill out a new W-4.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication
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