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Tax Information:
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Options for Paying Taxes

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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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