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| A shoe is usually cheaper than your tax debt |
Some people just don't have the best
luck. During tax time you can can rest assured you will hear most
people say, “I'm gonna do so much with my return this year.”
They'll all have their projects or vacation plans, being happy about
money they should already have. It's different for you this year,
though, and you have to stay quiet. You may even have to hide a look
of worry on your face with a feigned smile. Instead of getting a
refund you owe the IRS money, and you may or may not know how you're
going to pay it back.
This article outlines the methods of
payment that the IRS has to help you pay back your tax debts. For the
Internal Revenue Service, this is not their first rodeo, and they are
in business because people pay. They have methods for you to pay back your tax debt even when you can't pay it in one lump sum.
Methods of Payment
You can move the funds electronically.
This can be done by an electronic transfer of funds, a written check
from your bank account, a cashier's check, money order, or good old
greenbacks(cash money). If you want to do this online, the web
address is
www.eftps.gov or you
can call 1-800-555-4477.
There is also the option of having the
IRS withhold from your weekly or bi-weekly employment checks. The IRS
has a withholding calculator at their website,
www.irs.gov,
which can help you figure out how much you will have to give up each
pay period. You must contact your employer as well, in order to
change your W-4.
It might be better to get a loan.
You're expected to pay the IRS back in full including any penalties
and/or interest you may have accrued during the process. If you can't
pay back the large amount you may owe, it may be best to get a loan.
This is essentially moving your debt to another person, but if the
interest rates are less than what the IRS will charge, you may be
making the right choice. The IRS regularly charges penalties, which
they must do by law, and those are usually higher than any loan you
may receive from a bank or private investor. Just don't use a loan
shark or anyone that may break your legs or have you “sleeping with
the fishes.”
Payment by credit card is an option you
may can take advantage of. Everyone pays for everything with their
credit cards and the IRS is no different. This is very similar to
taking out a loan in that the interest rate on the credit card may be
lower than the combined charges of the IRS interest rate and
accompanying penalties. There are three companies that you can pay
your debt with the IRS through: Link2Gov at 888-PAY-1040 (or
www.pay1040.com), RBS WorldPay, Inc. at 888-9PAY-TAX (or
www.payUSAtax.com), or Official Payments Corporation at 888-UPAY-TAX
(or www.officialpayments.com/fed).
Ways to help with
your debt(and maybe even lessen it!)
You should obtain
an Online Payment Agreement if you owe $25,000 or less in combined
tax, penalties and interest. You can request such an agreement by
using the Online Payment Agreement application at the IRS's website.
Just because you owe more doesn't
necessarily mean you are out of the running for an installment
agreement. You have to file an additional form, which is Form 433F.
This is also known as a Collection Information Statement, and it is
required before you can be considered for an installment agreement.
You should apply for an installment
agreement if you can't pay back your debt in full. This is similar to
getting your check garnished, but you have an agreement to pay the
IRS your debt back in monthly installed payments. This is only after
you have become current with all your returns and other estimated tax
debts.
The installment agreement is great if
you're approved, but it comes with a one-time user fee that will be
charged in addition to your tax debt. This can range from $105 for a
new agreement or $52 for directly deducted agreements from your bank
account. If you have a lower income, the fee can be lowered to $43.
A form 9465 is a request document
required for an installment agreement, and must be sent along with
your bill from the IRS. The approval time for this document to be
considered is usually around 30 days. You will then be informed if
you were approved, denied, or if they require additional information
to process your request.
If you can get an Offer-in-Compromise
program in place, you may actually settle your debt with the IRS for
less than you originally owed. Don't think you can apply for this
any time you have a large sum to pay back, as the IRS does several
checks and investigations into your financial situation to determine
that you can't pay the debt in full as a single payment or even
though a payment agreement.
A time extension could benefit you as
well, but you still have to pay your tax debt in full. You can call
1-800-829-1040 or by filling out the Online Payment Agreement
Application which was detailed above. You usually don't have to pay a
set up fee for a shorter-term agreement.
Leave a comment if you found this
article informative, or have found other ways to pay
back your debts with the IRS.
When
you file your online tax return, make sure it is with a reputable company, like
Onlinetaxpros.com. We
make it easy to file taxes online and look forward to helping you e-file your income taxes
More articles about debt and the IRS:
Online Taxes: Common Mistakes When Filing Taxes
