Many taxpayers get a tax refund from the IRS each year. However, if you owe tax, here are nine tips on how to deal with your problem.
Tip #1. If you get a bill for late taxes, you are expected to promptly pay all the taxes 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 or borrow the funds to pay the bill in full rather than to make installment payments to the IRS.
Tip #2. You can also pay the bill with your credit card. Plus you get points by using your credit card. To pay by credit card contact either Official Payments Corporation at 800-2PAYTAX, www.officialpayments.com, Link2Gov, 888-PAY-1040 or www.pay1040.com. It is better to owe the credit card company than it is to owe Uncle Sam.
Tip #3. The interest rate on a credit card or bank loan may be lower than the combination of the interest and penalties imposed by the Internal Revenue Code. The IRS charges a “failure to pay” penalty which is in addition to the interest which makes the tax amount due even higher.
Tip #4. You can also pay the balance owed by electronic funds transfer, check, money order, cashier’s check or cash. The IRS loves 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 go online at www.eftps.gov.
Tip #5. An installment agreement may be requested if you cannot pay the liability in full. This is an agreement between you and the IRS for the collection of the amount due in equal 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. If over $25.000, the IRS will require a documented financial statement sent and reviewed by the ASC UNIT.
Tip #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. This is very simple and painless.
Tip #7. You can also complete and mail in IRS Form 9465, Installment Agreement Request, along with your bill in the envelope that you have received from the IRS. The IRS will inform you usually within 30 -45 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 or 433-F, is an amount that will fully pay the total balance owed within 60 months. The IRS will not proceed if over 60 months.
You may still qualify for an installment agreement if you owe the IRS more than $25,000, but Form 433-F, Collection Information Statement, is required to be completed before an installment agreement can be considered. This 433-F is used by the ACS Unit. If your balance is over $25,000, consider your financial situation and propose the highest expenses possible, as that is how the IRS will arrive at your payment amount based upon your financial information.
Tip #8. If an agreement is approved, a one-time user fee will be 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 with incomes at or below certain levels, a reduced fee of $43 will be charged, and is automatically figured based on your income.
Tip#9. Make sure your withholding is adjusted so you do not have the same problem again.
Tip #10. Fresh Start Tax can answer any questions you have regarding all of your IRS issues.
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Fresh Start Tax is one of the premier tax resolution firms in the country. We deal with all types of civil cases including individuals, businesses, non-profits, partnerships and corporations. We have staff that specialize in every facet of IRS representation. We know all the IRS tax strategies because of our extensive IRS working backgrounds. Some of our many specialties include the following:
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