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CAN'T PAY YOUR TAXES?
If you end up owing the IRS this year, and don't
have enough money to settle this debt, you have several
payment options.
Even if you know you are not going to be able to pay
your tax bill, you still need to file your return on
time. Doing so will help you avoid the IRS's
failure-to-file penalty of 5 percent per month (up to a
maximum of 25 percent) of your balance due. You will
still have to deal with the failure-to-pay penalty each
month your bill is outstanding, however it's only 0.5
percent of the total amount you owe.
Paying with a credit card
You can utilize a credit card for paying some or all of
your taxes. Remember that even though you will be
eliminating your debt with the IRS, you are going to
have to deal with the interest fees associated with your
credit card. In most cases, the cost of your credit card
interest is going to be less than the penalties imposed
by the IRS for not paying on time. We feature a variety
of
reward credit card offers that offer perks for
credit card use.
Installment plans
Suppose the amount you owe is too much to pay with a
credit card. If this is the case, you can work out a
monthly payment plan with the IRS. You can even choose
how much you want to pay every month, and what day your
payment will be remitted.
If you have always paid your taxes on time, and your
current tax bill is less than $10,000, the IRS can not
refuse your request for payment installments. However,
you must pay-off your taxes within three years. You will
need to attach
Form 9465, Installment Agreement Request,
to the front of your tax return in order to request an
installment plan.
You must provide verifiable, detailed financial
information when requesting a partial-payment
installment. In addition, your financial status is going
to be re-reviewed by the IRS every two years. If your
status changes, you will either have to increase the
amount of your payment installments, or your agreement
can be terminated.
No matter if you pay entire or part of your tax bill via
an installment agreement, it is important to note that
it will end up costing your more over time. You will be
charged a one-time fee of $105 for the installment
agreement. If you choose direct debit for payments, the
fee is $52. Any fees will be billed with your first
payment. Also, you are still going to have penalties and
interest for your unpaid tax bill. It is also possible
that the IRS will file a federal tax lien against you,
which will be released once you pay off your installment
loan.
Making a deal with the IRS
If you don't think you are going to be able to pay off
your tax bill within 3 -5 years, you will need to
negotiate an offer in compromise, OIC, with the IRS.
This means you would agree to make a lump sum payment
for less than what you owe. In these instances, the
agency hopes to get some taxpayer money quicker than it
would after years of expensive collection efforts.
The amount that you offer to pay must be reasonable. In
addition, there is now a $150 application fee with the
request. This fee helps the IRS weed out individuals
that are merely looking to stall having to pay their
taxes.
Your financial situation and future potential earnings
will be carefully reviewed by the IRS when determining
whether your offer is suitable. OIC is designed for
people with extreme situations. Most people that file
for an are denied. If you think your circumstances fits
the requirements, you will need to file
Form 656, Offer
in Compromise, and
Form 433-A, Collection Information
Statement.
You must also submit the
$150 application fee along with Form 656-A, Offer in
Compromise Application Fee Instructions and
Certification. If you have little or no income, you can
have this fee waived by filing
Form 656-A. If you do not
send the fee in, your offer application will be denied
"without further consideration." If your application is
denied, and you have sent the money in, you do not get
the $150 back. However, if the IRS accepts your offer,
your fee will go toward your new payment amount.
In conclusion...
No matter which route you choose for paying your
taxes, pay as much as you can, as soon as you can.
Delaying will only result in you having to pay more
money in penalties and interest.
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