Nine Tips for Taxpayers Who Owe Money to the IRS

To this day, we at Abo and Company hear from many of our clients and colleagues  "…if the recession really ended so long ago, how come we're still feeling the pain."  Back in April Abo and Company sent out one of our email alerts with options available regarding the filing of extensions.  Well, unfortunately, the final extended due date for filing personal tax returns is rapidly approaching (i.e. October 15th) and, for many, the day of reckoning is here.

Do you or someone you know, still owe taxes on last year's return which was put on extension?  Well, we thought we'd share with you what the IRS says can be options for taxpayers to pay taxes yet due. (yep, that's right, the IRS).

Anyway, here are nine tips for taxpayers who owe money to the IRS. As we've suggested in other alerts, you just may wish to print this out for future reference or to even pass along to a friend (sorry trees).

1. If you get a bill for late taxes, you are expected to promptly pay the tax owed including any penalties and interest. If you are unable to pay the amount due, it is often in your best interest to get a loan to pay the bill in full rather than to make installment payments to the IRS.

2. You can also pay the bill with your credit card. The interest rate on a credit card or bank loan may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. To pay by credit card contact one of the following processing companies: Official Payments Corporation at 888-UPAY-TAX (also www.officialpayments.com/fed) or Link2Gov at 888-PAY-1040 (also www.pay1040.com) or RBS WorldPay, Inc at 888-9PAY-TAX (also www.payUSAtax.com). Unfortunately, beyond the finance charges your credit card company will impose on you, the approved service providers doing this for the IRS will charge a permitted "convenience fee" for what we've recently seen as much as an additional 2.35% on the amount charged.  Ouch!

3. You can pay the balance owed by electronic funds transfer, check, money order, cashier’s check or cash. To pay using electronic funds transfer you can take advantage of the Electronic Federal Tax Payment System by calling 800-555-4477 or online at www.eftps.gov.

4. An installment agreement may be requested if you cannot pay the liability in full. This is an agreement between you and the IRS to pay the amount due in monthly installment payments. You must first file all returns that are required and be current with estimated tax payments.

5. If you owe $25,000 or less in combined tax, penalties and interest, you can request an installment agreement using the Online Payment Agreement application at IRS.gov.

6. You can also complete and mail to the IRS their Form 9465, Installment Agreement Request.  The IRS will inform you usually within 30 days whether your request is approved, denied, or if additional information is needed. If the amount you owe is $25,000 or less, provide the highest monthly amount you can pay with your request. Of course, if you can pay the full amount you owe within 120 days, you can just call 1-800-829-1040 to establish your request to pay in full. If you can do this, you can avoid paying the fee to set up an installment agreement. Instead of calling, you can also apply online.

7. You may still qualify for an installment agreement if you owe more than $25,000, but a Form 433F, Collection Information Statement, is required to be completed before an installment agreement can be considered. If your balance is over $25,000, consider your financial situation and propose the highest amount possible, as that is how the IRS will arrive at your payment amount based upon your financial information.

8. If an agreement is approved, a one-time user fee will be charged.  The user fee for a new agreement is currently $105 or $52 for agreements where payments are deducted directly from your bank account.  For eligible individuals with incomes at or below certain levels, a reduced fee of $43 will be charged.

9. Taxpayers who have a balance due may want to consider changing their W-4, Employee’s Withholding Allowance Certificate, with their employer. There is even a withholding calculator available on IRS.gov to help taxpayers determine the amount that should be withheld.
 
We didn't say it was easy but at least there are options.