Taxpayer Tips – IRS Debts
If you receive a notice from the Internal Revenue Service that indicates you owe late taxes or have a federal payment due, you are required to promptly pay the tax owed including any penalties and interest.
If you are unable to pay the amount due, I would suggest you consider obtaining a loan to pay the bill in full, rather than making installment payments to the IRS. Often the interest rate and penalties the IRS must charge by law are higher than what lending institutions may offer. There are several ways that you can pay an outstanding tax liability to the IRS, including the following:
- Electronic Funds Transfer
To pay using electronic funds transfer, use the Electronic Federal Tax Payment System by either calling 800-555-4477 or using the online access at www.eftps.gov.
- Credit Card Payments
The interest rate on a credit card may be lower than the combination of interest and penalties the IRS must charge by law. The following third party processing companies would need to be contacted to pay by credit card:a. – WorldPay US, Inc. at 888-9PAY-TAX (or www.payUSAtax.com),
b. – Official Payments Corporation at 888-UPAY-TAX (or www.officialpayments.com/fed),
c. – Link2Gov Corporation at 888-PAY-1040 (or www.pay1040.com).
- Additional Time to PayBased on your circumstances, you may be granted a short additional time to pay your tax bill in full. A brief additional amount of time to pay can be requested through an online payment agreement application at www.IRS.gov or by calling 800-829-1040. There generally is no set up fee for a short-term agreement.
- Installment AgreementYou may complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill using the envelope you received from the IRS. The IRS will inform you (usually within 30 days) whether your request is approved, denied, or if additional information is needed. You may request an installment agreement if you cannot pay the total federal tax liability you owe in full. This is an agreement between you and the IRS to pay the amount due in monthly installment payments. You must first file all required returns and be current with estimated tax payments. If an installment 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 lower incomes, the fee can be reduced to $43. Please note: if you miss a payment, the IRS will cancel the installment agreement and require the total amount due in full.
- Apply Using Online Payment Agreement
If you owe $50,000 or less in combined tax, penalties and interest, you can request an installment agreement using the Online Payment Agreement application at www.IRS.gov. You may still qualify for an installment agreement if you owe more than $50,000, but you are required to complete a Form 433F, Collection Information Statement, before the IRS will consider an installment agreement.
- Offer in Compromise
The IRS is now offering more flexible terms with a program titled “Offer-in-Compromise” (OIC). An OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax debt for less than the full amount owed. An OIC is generally accepted only if the IRS believes, after assessing the taxpayer’s financial situation; that the tax debt can’t be paid in full as a lump sum or through a payment agreement.
- Payroll Withholding
Taxpayers who have a balance due may want to discuss changing their Form W-4, Employee’s Withholding Allowance Certificate with their employer to increase the amount of federal tax withheld, thereby paying additional federal tax via payroll withholding.
- Fresh Start
The IRS has a program to help struggling taxpayers get a fresh start. Through the Fresh Start program, individuals and small businesses may be able to pay the taxes they owe without facing additional or unnecessary burden. For more information about payment options or IRS’s Fresh Start program, visit www.IRS.gov. IRS Publications 594, The IRS Collection Process, and 966, Electronic Choices to Pay All Your Federal Taxes, also provide additional information regarding your payment options. These publications and Forms 9465 and W-4 can be obtained from www.IRS.gov or by calling 800-TAX-FORM (800-829-3676).