Ten Tips for Taxpayers Who Owe Money to The IRS

While the majority of Americans get a tax refund from the Internal Revenue Service each year, there are still many taxpayers who owe each year and are unable to pay their taxes all at once time. The IRS has a number of ways for citizens to pay their tax bill.

The IRS has announced an effort to help struggling taxpayers get a fresh start with their tax liabilities. The goal of this effort is to help individuals and small businesses meet their tax obligations, without adding any unnecessary burden. Specifically, the IRS has announced new policies and programs to help taxpayers pay back taxes and avoid tax liens.

Here are ten tips for taxpayers who owe money to the IRS:

Tax Bill Payments

If you get a bill this summer for late taxes, you are expected to promptly pay the tax owed including any penalties and interest. If you are unable to pay the amount due, it is often in your best interest to get a loan to pay the bill in full rather than to make installment payments to the IRS.

Additional Time to Pay

Based on your circumstances, you may be granted a short additional time allotment to pay your taxes in full. You can make this request through the Online Payment Agreement application at www.irs.gov.

Credit Card Payments

You can pay your bill with a credit card. The interest rate on a credit card may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. 

Electronic Funds Transfer

You can pay the balance by electronic funds transfer, check, money order, cashier’s check or cash.

Installment Agreement

You may request an installment agreement if you cannot pay the liability in full. This is an agreement between you and the IRS to pay the amount due in monthly installments instead of one lump sum. You must first file all required returns and be current with estimated tax payments.

Online Payment Agreement

If you owe $100,000 or less in combined tax, penalties and interest, you can request an installment agreement using the Online Payment Agreement application at www.irs.gov.

Form 9465

You can complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill in the envelope you received from the IRS. The IRS will inform you (usually within 30 days) whether your request is approved, denied, or if additional information is needed.

Collection Information Statement

You may still qualify for an installment agreement if you owe more than $25,000.

User Fees

If an installment agreement is approved, a one-time user fee will be charged. The user fee for a new agreement is $105 or $52 for agreements where payments are deducted directly from your bank account. The fee can even be reduced to $43 for eligible individuals with lower yearly incomes.

Check Withholding

Taxpayers who have a balance due may want to consider changing their W4 Employee’s Withholding Allowance Certificate, with their employer.