Filing your federal tax returns is not an easy task for most people; if you’re ready to file with the IRS , but are not able to pay in full the experts advise that you file anyway.
Penalties apply for failure to file and failure to pay IRS. To reduce the hit to your wallet from penalties, be sure to file your return even if you’re going to owe.
If you can’t pay up right away, don’t throw in the towel just yet, there are many options available, here are some of the options to consider if you don’t have the ability to pay your entire tax bill by April 15.
Use your credit card
I’m not a huge fan of replacing one debt with another, but if your ability to pay IRS is a timing issue, as opposed to a “I absolutely don’t have it” issue, you can pay your federal income taxes by credit card, the IRS accepts all major credit cards (American Express, Discover, MasterCard, or Visa), to make a payment, head over to the credit card payment page on the IRS web site and choose one of the payment processors to pay by phone.
The IRS doesn’t charge a fee for credit card payments but the processing companies do, the amounts vary from 1.87% to 2.35% of your bill for credit card payments (keep in mind that your credit card statements will say “United States Treasury Tax Payment” and the convenience fee paid to your provider will be listed as “Tax Payment Convenience Fee” or something similar), while the fee might be painful, it is deductible as a miscellaneous itemized deduction (subject to the 2% rule).
Re-finance your home Again
As I already mentioned above, I am not a fan of replacing one debt with another but even the IRS will recommend a re-fi to pay your taxes if you can afford it, if you have equity in your home, using that equity to resolve your outstanding tax debt may make sense. Mortgage rates remain relatively low and unlike credit card interest, you can deduct home mortgage interest on your income taxes if you itemize, converting usable assets into usable resources can pay IRS off but only if you can manage it right, you don’t want to lose your home over a bad tax bill.
Enter into an Installment Agreement
If you can’t afford to pay IRS your tax bill all at once, consider an installment agreement. You don’t even have to speak with a real person. If you owe $50,000 or less in combined individual income tax, penalties and interest and you’ve filed all of your tax returns (if you haven’t filed your returns, you’ll have to do that before you can sign up for an installment agreement).
Consider an Offer in Compromise
An OIC allows you to settle your tax debt for less than the full amount you owe. The IRS considers a host of circumstances including the ability to pay; income; expenses; and asset equity. Generally, the IRS will only agree to an OIC if they determine they will not be able to collect the amount due within a reasonable period of time. The reality is that everyone who owes has an excuse and the IRS is looking for a good one before they cut you a break.
As with the installment agreement, you must be current with all filing and payment requirements and you are not eligible if you are currently in an open bankruptcy proceeding. There’s a non-refundable application fee of $ for OIC. In addition, you’ll need to be prepared to submit a lump sum payment of 20% of your tax due or the equivalent of a monthly payment upfront.
Don’t believe everything that you see on TV: there are strict standards for an OIC. You may want to use a professional service to aid you in calculating a preliminary offer amount; this will give you better insight into your chances of qualification.
Ask for additional time
Based on your circumstances, you may be granted a brief amount of additional time to pay your tax in full. You can make the request through the Online Payment Agreement or by calling.
Make a partial payment
A little something is better than nothing. The more you pay IRS now, the less penalty and interest you’ll owe later. If you choose to mail a partial tax payment, make your check, money order or cashier’s check payable to U.S. Treasury. Be sure to write your name, address, daytime phone number, Social Security number, the tax form number (for example, 1040 or 1040EZ) and the tax year on the memo line. Be sure to mail your payment to the correct address. Then follow-up immediately with one of the above options in order to resolve your outstanding liability.
Can’t pay at all?
If you are insolvent or unable to pay IRS due to circumstances beyond your control (for example, unemployment or disability), the IRS is willing to work with you. Give them a call or use the phone number on any notice that you might have received in the mail.
If you’re not quite sure what you owe for a specific tax year, you can contact a qualified professional to help you investigate your balance.
Whatever you do, don’t ignore your outstanding tax bills, they won’t simply fade away, to the contrary, they’ll likely get bigger, take steps now to pay IRS what you owe, help is available.
Everyone has a busy schedule, but dealing with your your tax debt should be a priority. If you’re feeling overwhelmed or alone, a great first step is to contact a qualified tax debt relief professional. Most tax debt pros offer free consultations; it is highly recommended to take advantage of these offers to get informed and make a plan.
Source:
http://www.curadebt.com/debt-settlement-program/
http://www.igrad.com/articles/understanding-mortgages-and-debt-to-income-ratios-for-homebuyers
https://www.irs.gov/uac/Pay-Taxes-by-Credit-or-Debit-Card
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