Eight ( 8) great tips if you owe money to the IRS on back taxes
Without question, these tips sum up everything you will need to know about owing monies to the IRS on your back individual income taxes.
1. When you get a tax bill from the IRS on back taxes, you are expected to promptly pay the tax owed including any additional 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 Internal Revenue Service.
2. Most taxpayers do not know that they can also pay the bill by credit card. The nice thing about this, you can rack up some extra points on your credit card. To pay by credit card contact either Official Payments Corporation at 800-2PAYTAX, www.officialpayments.com, Link2Gov at 888-PAY-1040, or www.pay1040.com. These links get you right into the system to get your back tax situation cleared up immediately.
3. Another important factor to keep in mind is the fact that 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 and by Congress. The IRS sends quarterly notifications on how much the interest rate will be. It fluctuates quarter by quarter.
4. You can also pay the Internal Revenue Service balance owed by electronic funds transfer, check, money order, cashier’s check or cash. To pay by using electronic funds transfer you can take advantage of the Electronic Federal Tax Payment System by calling 800-555-4477 or 800-945-8400 or online at www.eftps.gov. Should you have questions about this option feel free to call us at any time.
5. An installment agreement or part pay agreement by you the taxpayer may be requested if you cannot pay the tax liability in full. This is an agreement between you and the Internal Revenue Service for the collection of tax and the amount due in monthly installment payments. To be eligible for an installment agreement, you must first file all returns that are required and be current with estimated tax payments. The IRS will never enter into a payment agreement unless ALL tax returns have been filed.
6. If you owe $25,000 or less in combined tax, penalties and interest, you can request an installment agreement using the web-based application called Online Payment Agreement found at IRS.gov. Once again, all tax returns on any back years MUST be filed or IRS will not accept any agreement. These are easy, simple and free.
7. Another option is for you to complete and mail to Internal Revenue Service, Form 9465, Installment Agreement Request, along with your bill in the envelope that you have received from the Internal Revenue Service. 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 monthly amount you wish to pay with your request. At a minimum, the monthly amount you will be allowed to pay without completing a Collection Information Statement, Form 433 A,B,or F, ( collection information statement ) is an amount that will full pay the total balance owed within 5 years or 60 months. Many times this is the single best option.
The taxpayer 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. This financial statement will have to be fully documented with copies of pay stubs and all bills to support each and every expense. If your balance is over $25,000, consider your financial situation and you should propose the highest payment amount possible, as that is how the IRS will arrive at your payment amount based upon your financial information. Caution should be used when giving the IRS a financial statement. If the IRS is not comfortable with the terms and conditions of your proposal, you have given them a road map to your assets.
8. If a payment agreement is approved, a one-time user fee is charged. The user fee for a new agreement is $105 or $52 for agreements where payments are deducted directly from your bank account. For eligible individuals taxpayers with incomes at or below certain levels, a reduced fee of $43 will be charged, and is automatically figured based on your income.
Keep in mind if you cannot afford to pay your taxes at any time, the IRS has another program where the Service can suspend your case because it is considered a HARDSHIP. This is also called Currently Not Collectible (CNC) Check out our website for the topic and see if you qualify. If you do, Fresh Start Tax can help walk you through the process to make this happen.