|
|
When you owe money to the IRS it feels like there is always a cloud hanging over your sunny days, but you have to pay your debt sooner or later, and preferably on time!
In order to avoid that, you should first make sure you file your return on time. Not filing a tax return is not a good option at all. The IRS knows that you owe taxes, they have copies of your W-2s and 1099s whether you file a tax return or not. The difference is that by filing a tax return on time, that is on or before April 17 this year, or during the six months extension after filing Form 4868 requesting an extension of time to file, you acknowledge your obligation and you avoid penalties for not filing your return on time.
|
|
|
|
|
|
If you are not able to pay the tax you owe by your original filing due date, the balance is subject to interest and a monthly late payment penalty. There is also a penalty for failure to file a tax return, so you should file timely even if you cannot pay your balance in full. It is always in your best interest to pay in full as soon as you can to minimize the additional charges.
Let’s see what payments options you have for paying your taxes. Obviously, you can use the old and trusted method of sending a check, but there are other options you may consider.
IRS advises that the electronic payment options, available on their Payments page and the IRS2Go app, are the best way for you to pay federal taxes.
You can make electronic payments online, by phone, or from a mobile device. Paying electronically is safe and secure, and the IRS uses the latest encryption technology. |
|
|
- You can schedule your payment in advance, and you will receive confirmation after it’s submitted. It’s quick, easy, secure, and much faster than mailing in a check or money order.
Direct Pay is a secure service you can use to pay your current and prior year 1040 series tax returns and more. Pay directly from your checking or savings account at no cost to you. After you complete five steps, you’ll receive instant confirmation that your payment has been submitted. With Direct Pay, you can use the "Look Up a Payment" feature to view your payment status. You can modify or cancel your payment there until two business days before your scheduled payment date.
The IRS also have a newer payment option for individual taxpayers who need to pay their taxes with cash. In partnership with ACI Worldwide’s OfficialPayments.com and the PayNearMe Company, you can now make a payment without the need of a bank account or credit card at over 7,000 7- Eleven stores nationwide.
|
|
|
|
|
|
| If you wish to take advantage of this payment option, you should visit the IRS.gov payments page, select the cash option in the other ways you can pay section and follow the instructions: |
|
|
|
You will receive an email from OfficialPayments.com confirming their information. |
|
|
|
|
Once the IRS has verified the information, PayNearMe sends the you an email with a link to the payment code and instructions. |
|
|
|
|
You may print the payment code provided or send it to your smart phone, along with a list of the closest 7- Eleven stores. |
|
|
|
|
The retail store provides a receipt after accepting the cash and the payment usually posts to your account within two business days.
|
|
|
|
|
There is a $1,000 payment limit per day and a $3.99 fee per payment. |
|
|
Because PayNearMe involves a three-step process, the IRS urges taxpayers choosing this option to start the process well ahead of the tax deadline to avoid interest and penalty charges.
In this new option, PayNearMe is currently available at participating 7-Eleven stores in 34 states. Most stores are open 24 hours a day, seven days a week. For details about PayNearMe, the IRS offers a list of frequently asked questions on IRS.gov.
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 full payment of your tax liability through loans, such as a home equity loan from a financial institution or a credit card. The interest rate and any applicable fees charged by a bank or credit card company are usually lower than the combination of interest and penalties imposed by the Internal Revenue Code. |
|
| If you just cannot pay your tax burden, other payment solutions are also available, including: |
|
|
|
Extension of Time to Pay — Taxpayers may be eligible for a short extension of time to pay of up to 120 days. Taxpayers should request an extension if they would be able to pay their taxes in full within the extended timeframe. |
|
|
|
|
|
|
|
|
Installment Agreement — Installment agreements paid by direct deposit from a bank account or payroll deduction from wages will help avoid agreement default by ensuring timely payments and will reduce the burden of mailing payments and save postage costs. |
|
|
|
|
Delaying Collection — If the IRS determines that a taxpayer is unable to pay, it may delay collection until the taxpayer's financial condition improves. |
|
|
|
|
Offer in Compromise — Some taxpayers are able to settle their tax bill for less than the amount they owe by submitting an Offer in Compromise (OIC). However, the criteria for accepting an offer are strict and relatively few offers are accepted each year.
|
|
|
When the IRS sends you a bill, if you do not respond to the first notice or subsequent notices, the account becomes delinquent. Delinquent accounts may be turned over to the Automated Collection System (ACS) or to the Collection field function. ACS personnel will contact you by telephone to attempt to work out an agreeable payment solution. If the delinquent account requires field contact, a revenue officer will try to resolve the account with you.
The worst thing you can do is do nothing at all! Call the phone number on the letter the IRS sent you if you cannot pay your taxes. You will need to give the IRS complete financial information, so make a list of your monthly expenses and income before you call and be prepared to discuss those with the IRS. Make sure you include: medical costs, transportation costs, housing costs, other expenses that you don’t pay every month, extraordinary circumstances (such as life-changing events). |
|
| If you do not contact the IRS, they may take action to collect the liability, such as: |
|
- Filing a Notice of Federal Tax Lien,
- Serving a Notice of Levy, or
- Offsetting a refund to which you are entitled.
|
|
|
|
|
All of the options above deserve more detailed information which will be provided in our future newsletters.
Even if all these tools are available to you without the assistance of a professional, it is still our advice to contact a tax pro who may be able to give you other specialized advice to enable you to see the light at the end of your financial tunnel once again. |
|
|
|
