Now tax season is over and hopefully you filled your tax return. In my practice I have a few clients who owe a balance due on their returns. My first and main advise- FILE. File your returns regardless of you having funds to pay your balance due. If you don’t file before a due date, you will be automatically assessed a fee for ” failure to file your tax return”. You filled on time-you already saved money.
So you have a balance, what is your options of paying it.
Best option is to pay it in full before a due date or after if you have to. This can be done via direct debit ( and IRS will take only amount you indicated on the date you indicated on your authorization. Second option is a payment via credit/debit card. You can do it by go to https://www.irs.gov/uac/pay-taxes-by-credit-or-debit-card
Third option you can mail a physical check to the IRS.
What if you need time or help to pay your balance. There are two options available:
Installment Agreement and Offer of Compromise
Installment Agreement is a contract with IRS, where IRS allows to make smaller periodic payments over time. You can apply online https://www.irs.gov/individuals/online-payment-agreement-application
or over the phone 1-800-829-1040
or by mail. If your balance is less than $25,000 you need form 9465 if more than $25,000, use form 9465-FS . Also you can fill out form 2159 Payroll Deduction agreement.
and of course in person.
Remember you will still be charged applicable penalties and interest. Also, a Notice of Federal Tax Lien can be filled against you, and this lien goes on your credit until you pay your balance in full, but IRS will send you a letter warning you that they are planning on filling a lien.
Offer in Compromise may be accepted by IRS if you cannot pay in full or even through installments. In short, you will ask IRS to settle unpaid taxes for less than what you owe. Offer in Compromise may be accepted if:
– IRS agrees that tax debt amount may not be accurate,
-Taxpayer has insufficient assets and income to pay balance due
– or you have exceptional circumstances and paying a balance due would course an economic hardship or would be unjust
Form 656-L needs to be filled out if tax debt inaccurate or form 656 if a taxpayer unable to pay due to hardship