Wednesday, August 8, 2012

How To Pay Back The IRS


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.”

You can pay your taxes with your credit card!
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.

This information comes directly from http://www.irs.gov/newsroom/article/0,,id=172694,00.html
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
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