If you owe federal taxes that were not paid there are ten things you should know about what to do:
- Pay your tax bill in full as soon as possible. When you have a balance due on a tax return or if you get a bill from the IRS, you’ll save money by paying it with the filing of the tax return or whenever you receive a notice from the IRS or as soon as you can thereafter.
- If you can’t pay it in full, you should pay as much as you can. That will reduce the interest and penalties charged for late payment. You should think about using a credit card or getting a loan to pay the amount you owe because the IRS assesses various and multiple penalties for late filing and late payment in addition to interest on any balance due.
- Use IRS Direct Pay. The best way to pay your taxes is with the IRS Direct Pay tool. It’s the safe, easy and free way to pay from your checking or savings account. The tool walks you through five simple steps to pay your tax in one online session. Just click on the ‘Pay Your Tax Bill’ icon on the IRS home page.
- Get a short-term extension of time to pay. You may qualify for extra time to pay your taxes if you can pay in full in 120 days or less. You can apply online at IRS.gov. If you received a bill from the IRS you can also call the phone number listed on it. If you don’t have a bill, call 800-829-1040 for help. There is usually no set-up fee for a short-term extension, but interest and penalties for late payment continue to apply, so an extension of time to pay is an option best utilized only if you cannot find another way to pay your tax bill on time.
- Apply for a monthly payment plan. If you owe $50,000 or less and need more time to pay, you can apply for an Online Payment Agreement on IRS.gov. A direct debit payment plan is your best option. This plan is the lower-cost, hassle-free way to pay. There is a set-up fee to the IRS, but it is less than the set-up fee for other plans. There are no reminders, no missed payments and no checks to write and mail. You can also use Form 9465, Installment Agreement Request, to apply. For more about payment plan options visit IRS.gov.
- Consider an Offer in Compromise. An Offer in Compromise (OIC) lets you settle your tax debt for less than the full amount that you owe. An OIC may be an option if you can’t pay your tax in full. It may also apply if full payment will cause a financial hardship. You can use the OIC Pre-Qualifier tool to see if you qualify. It will also tell you what a reasonable offer might be.
- Change your withholding or estimated tax. You may be able to avoid owing the IRS in the future by having more taxes withheld from your pay. Do this by filing a new Form W-4, Employee’s Withholding Allowance Certificate, with your employer. The IRS Withholding Calculator on IRS.gov can help you fill out a new W-4.
- Make estimated tax payments. If you have income that’s not subject to withholding you may need to make estimated tax payments. See Form 1040-ES, Estimated Tax for Individuals for more on this topic.
- Understand the IRS Collection Process. To find out more see Publication 594, The IRS Collection Process. You can get this booklet on IRS.gov. You may also call 800-TAX-FORM to get it by mail.
- Consider Additional IRS Resources explaining the tax payment alternatives avaialable:
- Tax Topic 202 – Tax Payment Options
- Payment Plans, Installment Agreements
DISCLAIMER: This information is extracted with permission from IRS releases. We are not responsible for the application of this general information to the specific circumstances of a reader unless we have been engaged by the reader for assistance in a particular circumstance.
ASSISTANCE: If you need help on income tax matters, Roy & Associates, PC may be able to be of assistance. Our firm and its predecessor firms have been providing tax services to individuals, small businesses and nonprofit organizations in southwestern Pennsylvania since 1942. You may make an appointment with one of our Directors of Audit and Tax Services, all of whom are well-versed in personal income taxation. See the CONTACTS page above. Standard rates and terms for service will apply.
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