If you have to pay at this year’s tax filing deadline and cannot pay the full amount that you owe, you should still file your return by the due date and pay as much as you can. While you will incur late payment penalties, you will not incur late filing penalties.
You will receive a bill from the IRS for the remaining taxes due. At that time, you should again pay as much as you can. You will probably receive another bill before the IRS insists you set up an Installment Agreement to pay the remaining tax due.
You can charge your taxes on your American Express, MasterCard, Visa or Discover Card. To pay by credit card, contact one of the service providers by either telephone or website listed below and follow the instructions. The service providers charge a convenience fee based on the amount you are paying. Do not add the convenience fee to your tax payment.
Official Payments Corporation
Phone 1-800-2PAY-TAX (1-800-272-9829)
Phone 1-888-PAY-1040 (1-888-729-1040)
If this is not a good option for you, the IRS may allow you to pay any remaining balance over time in monthly installments through an Installment Agreement, or possibly settle for less than the full amount owed through its Offer in Compromise program. Do not count on this program if you have any available assets. It takes a long time to get an Offer in Compromise accepted, and you must have no current or future means of paying off your obligation before this is considered by the IRS.
To apply online for an installment payment plan, please see the following website: http://www.irs.gov/individuals/article/0,,id=149373,00.html
To see if you qualify for an installment payment plan, attach a Form 9465, Installment Agreement Request, to the front of your tax return. Do not attach Form 9465 if you applied online. The IRS has streamlined the approval process if the amount owed is not more than $25,000 and can be paid within a five-year period. Be sure to show the amount of your proposed monthly payment and the date you wish to make your payment each month. In addition, an installment agreement is guaranteed if:
- The amount owed is less than $10,000;
- All tax returns for the last five years have been filed timely and all income tax paid with no installment agreement entered into within that timeframe;
- The IRS determines, with your cooperation, that you are unable to pay the tax when it is due, and
- You agree to pay the full amount due in three years and to comply with all tax laws while the agreement is in effect.
The IRS charges a $105 fee for setting up an installment agreement. However, this amount can be reduced to $52 if you agree to make your payments via electronic funds withdrawal, or even to $43 if your income is low enough. You will be required to pay interest, plus a late payment penalty on the unpaid balance. This penalty, usually 0.5% of the balance due per month, drops to a 0.25% rate when the IRS approves the installment agreement, if your return was filed on time and you did not receive a levy notice from the IRS.
Besides possibly qualifying for the reduced late payment penalty, there is another reason to file your return by the due date: You avoid the late filing penalty of 5% per month of the balance due. Pay as much as you can when you file your return. This will reduce interest and penalty charges.
If you find that you cannot possibly come up with the money to pay your taxes, even through an installment plan, you may apply for an Offer in Compromise to settle your tax debt for less than the full amount owed. The IRS will review your financial situation and future income potential to determine whether your offer is appropriate. Send Form 656, Offer in Compromise, and Form 433A, Collection Information Statement, to the IRS to determine your eligibility.
The IRS website, www.irs.gov, has interactive sections to help you determine your eligibility for an installment plan or an Offer in Compromise. For more information about filing and paying your taxes, refer to Form 1040 or IRS Publication 17, Your Federal Income Tax. You may request a copy of IRS forms or publications by calling 1-800-TAX-FORM (1-800-829-3676) or download them from www.irs.gov. Taxpayers who need Forms 9465, 656, 433A or any other federal tax form, should act soon to be sure they have the item in time to meet the April deadline. If you have any questions or would like more information, contact Henssler Financial at 770-429-9166 or at [email protected]