Tax Payment Options: What You Should Know
If you have back taxes to pay and the problem is keeping you awake at night, the most important thing is to address the problem. In recent years, the Internal Revenue System (IRS) has recognized that more people are falling into difficulty with their tax payments and have become more amenable to accepting installment payments.
However, sticking your head in the sand and hoping the problem will go away could end up costing you more in the long run in penalties and interest. It is much better to be upfront about the problem and get the money you owe to Uncle Sam as quickly and conveniently as possible.
Go for an Individual Installment Plan
If you owe $50,000 or less in income tax (including any penalties or interest), you may be able to opt for an individual installment plan. This type of agreement allows you to make regular monthly payments until your tax bill is paid in full. You can make payment through the following methods:
- through your bank account
- by credit card
- by check or money order
- through the Electronic Federal Tax Payment System (EFTPS)
- through payroll deduction through your employer
- through an Online Payment Agreement (OPA)
If you do set up a monthly repayment plan it is important that you stick to your monthly payments. To apply for an individual installment agreement you will need to complete an IRS Form 9465.
Installment Agreement for Individuals Owing Above $50,000
If you owe more than $50,000 in back taxes then you must fill in IRS Form 945 and Form 433-F. This additional form is used to collect financial information so that the IRS can figure out the best way for you to pay your installments. You will be asked to detail any assets or real estate that you own and any lines of credit that are currently active. You will need to supply information about your monthly income and your monthly living expenses. With this information in mind the IRS will work out a suitable installment agreement for you.
Installment Agreement for Small Businesses
If you own a business and owe $25,000 or less in back taxes, you could request an installment agreement called “In-Business Trust Fund Express”, or an IBTF-Express IA, as it is otherwise known. This agreement won’t usually require you to submit a financial statement, but you must currently being employing staff. An IBTF-Express IA offers businesses a 24-month timeline to repay their back taxes. You will need to call the IRS to request this type of installment agreement.
Avoiding Unnecessary Penalties or Charges
Anybody can get into difficulty with their tax payments. The most important thing to do is to take control of the situation. The IRS won’t bite, and will give you a number of easier and more affordable ways to pay your tax bill. If you find that you are getting into difficulty with your tax repayments, our revenue officers can give you advice on managing your taxes more efficiently. We can also advise you on what to do if you receive a demand for immediate payment from the IRS.
We understand that this type of demand can be intimidating and daunting. We help you to cut through the jargon and put your mind at rest with our expertise and knowledge of the taxation system. Speak to us today to find out more about manageable ways to pay back taxes and to keep on top of tax payments in general.