While many people get a refund from the IRS when they file their taxes, some do not. If you owe federal taxes, the IRS has several ways for you to pay. Here are some quick tips for people who owe taxes:
- Pay your tax bill. If you get a bill from the IRS, you’ll save money by paying it as soon as you can. If you can’t pay it in full, you should pay as much as you can. Doing so will reduce the interest and penalties charged for late payment. However, think twice before using a credit card or getting a loan to pay the amount you owe if the amount is significant. Interest on a credit card may end up being more than the IRS would charge.
- 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. Direct Pay is new for 2014, and best of all free, so no need to pay a fee to other websites out there to settle your tax bill.
- Get a short-term extension 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.
- 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. The set-up fee is less than 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.
- Consider an Offer in Compromise. An Offer in Compromise 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. However, it is worth noting that an offer in compromise is a lengthy process, and only certain individuals may be a good fit for this option. A well-qualified Dallas CPA can determine if this is a suitable option for you by having you answer a few questions.
- 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. You can do this by filing a new Form W-4 with your employer. The IRS Withholding Calculator on IRS.gov can help you fill out a new W-4. If you have income that’s not subject to withholding you may need to make estimated tax payments in order to avoid penalties come tax filing. Also, check out our video on YouTube for more information about completing your W-4.
No one is happy to learn that he or she owes money to the IRS. However, several options are available to taxpayers for settling the tax debt with the IRS, including payment plans, offer in compromise, and extension to pay. If you have received a letter from the IRS or other tax bill, and you’d like to find out which may be the best option for you, please feel free to contact us by completing the contact form at the bottom of the page.
