Chances are if you’ve ever filed tax returns, you may not have been in the best financial position on April 15.
Sometimes, a tax bill can be higher than expected, leaving you unable to pay it all by the traditional spring deadline.
But there are IRS tax payment plans available if you need the extra time and flexibility to stay in the IRS’s good graces. After all, if you fall into back tax debt, you’ll end up paying more in fees, interests, and penalties.
That’s why it’s better to know your options when it comes to tax payment plans. Here’s a few of them.
First, if you have a credit card, you should consider paying your tax bill it. Depending on your card’s interest rate, you may end up paying less in the long run by avoiding IRS fees and interest. While credit card debt (like back tax debt) isn’t desirable, using a credit card may be better for your wallet.
If April 15 hits and you need more time to pay your bill, you can file IRS Form 4868 to get an extra 120 days. You can file this form for no reason at all, even online.
But there are fees: 0.75 percent per month. It’s a steal compared to the 5 percent monthly fee for not filing at all. But you’ll still have to file your tax return by April 15, so you’re not completely out of the woods.
If you’re ok with eating higher fees, then setting up an IRS installment payment plan is for you.
You can do it by filing IRS Form 9465, Installment Agreement Request.
There’s a $52 fee for setting up a direct debit plan. The fee for setting up a payroll deduction plan runs $120. But if you can pay the entire tax debt within 120 days, the fees are waived.
The paperwork doesn’t end at filing the Form 9465. You’ll also have to file a Form 433-F, Collection Information Statement. It may be a hassle, but the added flexibility will help.
Also, your tax debt balance will determine your payment plan details. If less than a $10,000 balance, the installment plan request is generally approved if you try to pay within three years.
If it’s between $10,000 and $25,000, you may be considered for a Streamlined installment plan, giving you six years to pay but coming with a minimum monthly payment calculated by dividing the tax debt balance by 72 months.
If you’re owing the IRS between $25,000 and $50,000, your monthly minimum stays at the total tax debt balance divided by 72 months, but you’ll have to divulge certain financial information to the IRS.
If you owe more than $50,000, an IRS installment plan isn’t out of the question, but the IRS will most likely dig through your financial situation by looking at your assets and accounts.
Not paying taxes at all would be ideal, but a little flexibility certainly makes things more manageable. If you need help paying your IRS back tax debt, look around our website to see how we can help.
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