An overwhelming majority of taxpayers get a refund when they file their returns; they’ve made IRS an interest-free loan throughout the year and IRS is repaying that loan. Sometimes, however, you’ve played W-4 roulette – or you’ve failed to pay estimated quarterly taxes — and lost. You wanted that bigger paycheck or more money in the bank and now you owe. What to do?
Obviously, the best way to deal with owing tax – is not to. As a service to our clients, we will calculate your federal and state withholding for you at no charge. If you’d rather do it yourself, here’s a handy tool that will assist you. IRS Withholding Calculator. We’ll also estimate any quarterlies you might need to pay and provide payment vouchers for you.
But in the event you do owe the government, don’t worry. We’ll help you resolve it as painlessly as possible.
PAY THE BILL
— When you get a bill, pay it. The sooner you full pay the balance, the fewer the penalties and interest. In some cases, borrowing to pay off the debt could be less expensive. If you pay in cash, walk it in to an IRS office and be sure to get a receipt. If you pay by mail, send it certified and keep the return receipt. You can also pay online directly from your bank account or by using a debit or a credit card. To use your debit or credit card, the company will charge you a fee, but that fee could be much smaller than what IRS charges to set up a payment arrangement. Here is the link to pay IRS on line: IRS Online Payments
You can also pay via the Electronic Federal Tax Payment System (EFTPS). If you regularly make payments, setting up an EFTPS account is a good idea. Visit EFTPS to set up and use the system. You can also pay by phone using EFTPS by calling 800-555-4477.
SHORT-TERM PAYMENT PLAN
You can apply for a short-term payment arrangement if you can full pay the debt in 120 days or less. Call IRS at the phone number listed on your bill; if you can’t find the number, call 800-829-1040; they will direct you. IRS generally doesn’t charge a fee for a short-term payment arrangement. If you want to avoid IRS’ long hold times, just bring your notice to us. We’ll get a few pieces of information and make the arrangements for you.
SIMPLIFIED INSTALLMENT AGREEMENT
If none of the above will work for you, consider making an installment agreement. If you owe less than $50,000, we can arrange a payment plan over a maximum of 72 months without providing IRS a financial statement. While this repayment period will result in the lowest payment, we strongly encourage you to pay the balance off as soon as possible, as penalties and interest will continue to accrue until the debt is paid off. If you agree to pay via direct debit, IRS will generally refrain from filing a lien against your property.
There is a one-time user fee associated with requesting an installment agreement. IRS will charge $105, unless you agree to direct debit, in which case, the fee is reduced to $53 ($43, if your income is below a certain level).
STANDARD INSTALLMENT AGREEMENT
So, what if you owe IRS more than $50,000 or you need longer than 72 months to pay? Then we’ll request an installment agreement (Form 9465 Installment Agreement Request) for you and we’ll submit a financial statement (Form 433F, Collection Information Statement). The same user fees apply.
OFFER IN COMPROMISE
In the event you owe more than you foresee being able to pay within the collection statute (10 years), we should consider an Offer in Compromise. An OIC allows you to settle your tax debt for less than the full amount. This is one of the areas in which we specialize. Unlike the myriad other companies who advertise this service, we don’t take your retainer unless we determine you will qualify for an adequate settlement. Settlements are generally based on your assets and your income; we sometimes have to turn applicants away. Our average settlement is five cents on the dollar.
IRS’ Fresh Start Initiative makes it much easier for individual taxpayers and small businesses to pay their back taxes and avoid liens and levies. Give us a call and let us see how it can help you.
Many of these resolution methods are available when you owe your state, as well. The terms and repayment periods will vary. Just give us a call and we’ll be happy to help you work things out.