There are few things more unpleasant in life than owing money to the IRS, especially if you can’t readily get your hands on it. Fortunately, depending on your unique situation, you have a few choices for paying down your tax burden. The IRS accepts several payment methods.
Don’t be a procrastinator.
It may soon become out of control if you put off dealing with your tax burden. The IRS will assess penalties and interest on your unpaid sum starting at 0.5 percent of what you owe every month. It will soon build up, and the agency will lose patience and resort to more drastic actions, such as levying and enforcing levies and liens on your income and property.
Suppose you owe the IRS $30,000 for the last two years’ tax returns. You think about going back and changing one or both of them to take advantage of any tax deductions you may have missed. That’s an excellent beginning step, but late penalties and interest will continue to accrue while you consider this alternative and eventually file two new returns.
You may be able to reduce your tax obligation by modifying your returns, but the IRS’s interest and penalties can more than negate any savings you may make. It may be more beneficial to you to address the debt first. If it turns out that you don’t owe that much, your outstanding sum can be changed later.
Consider an Installment Agreement
If your tax debt is manageable and you can pay it off over time, an installment agreement may be your best option. These arrangements allow you to pay off your debt in regular monthly payments that won’t begin to accumulate interest and penalties until the debt is paid in full.
Depending on your income, you may be able to arrange to pay your debt off in 24 to 60 monthly payments (or longer, if you can afford it). With this option, you won’t be hit with the 5% default penalty for not paying your debt in full, and you won’t have to pay interest on your balance.
If your income is sufficient to support monthly payments, you can likely afford to pay your taxes in full and promptly.
File an Extension to Avoid Late Filing Penalties
If you can’t pay your tax bill right away, file an extension and have six more months to make your payment. You can get a six-month extension to file by submitting Form 4868 to the IRS by the regular filing deadline. You can also file a request for a longer extension. This will give you an extra six months to file and pay, a one-year extension to file, or a two-year extension to pay.
You can still pay your taxes by the April deadline with a payment by the regular deadline when you file for an extension. You just need to file Form 4868 by April 15.
If you wait until the last minute, the easiest way to make a payment by the filing deadline is to pay by credit or debit card. This is a good option if you know how much you’ll owe, but it tends to be pricier than other payment options.
Paying for Your Tax Professional
If you want to hire someone to help you navigate the minefield of IRS regulations, that’s probably a smart move, mainly if taxes don’t come easily to you or you’ve never had to pay a large tax bill. The IRS charges a lot of small businesses and other taxpayers a lot of money to issue their refunds, so hiring a tax professional to get your tax refund to you more quickly and with fewer hassles can be pretty cost-effective.
The IRS isn’t going to take your tax debt lightly, so it’s important to pay what you owe promptly. If you can’t pay it in full, an installment agreement is your best option, or you can file an extension and pay what you can by the filing deadline to avoid penalties. You can also hire someone to file your taxes for you and help you get the most out of the process.
Axiom Tax Resolution Group is a team of tax resolution services specialists. Ignoring IRS tax problems can be a costly mistake. The trusted tax professionals at Axiom Tax Resolution Group are ready to find a permanent solution to your tax problems with the IRS. If you need assistance filing for tax debt forgiveness with the IRS, we’ve got you covered. Get in touch with us today and let us know how we can help.