In the current state of economic uncertainty, there are many taxpayers who can’t pay their federal income tax all at once. Fortunately, the IRS has a number of ways for people to meet their tax obligations and pay their tax bill. These new methods from the IRS are also designed to help taxpayers pay back taxes and avoid tax liens.
Additional time to pay. Based on your circumstances, the IRS may grant you a short additional time to pay your tax in full. A brief additional amount of time to pay can be requested through the Online Payment Agreement application at www.irs.gov.
Credit card payments. The IRS accepts tax payments made with a credit card. Consider paying your tax bill with a credit card if the interest rate on your credit card is lower than the combination of interest and penalties imposed by the Internal Revenue Code.
Installment Agreement. You may request an installment agreement from the IRS if you cannot pay your tax liability in full. An installment agreement is an agreement between you and the IRS that contractually obligates you to pay the amount due in monthly installment payments. To be in compliance with the terms of an Installment Agreement, you must first file all required returns and remain current with estimated tax payments.
Online Payment Agreement. If you owe $25,000 or less in combined tax, penalties and interest, you can request an installment agreement using the Online Payment Agreement application at www.irs.gov.
Check withholding Taxpayers who have a balance due may want to consider changing their W-4, Employee’s Withholding Allowance Certificate, with their employer. A withholding calculator that can help taxpayers determine the amount that should be withheld is available at http://www.stratatax.com/tools/links/
Lien Withdrawal after Entering into a Direct Debit Installment Agreement. If you meet certain eligibility requirements, you may qualify to enter into a Direct Debit installment agreement and have your liens withdrawn. Your request for lien withdrawal must be in writing using Form 12277, Application for Withdrawal. Eligibility requirements include, but are not limited to, owing less than $25,000, being in compliance with other filing and payment requirements. If are currently on a regular installment agreement, you may be eligible to convert to a Direct Debit Installment Agreement. By using the IRS Online Payment Agreement application.
StrataTax, a San Diego consulting and tax services firm, is available year-round to assist you with income tax preparation and tax planning. Call us at (858) 225-7720 to setup your free initial consultation or visit us at www.StrataTax.com for more information.
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