Tax Relief: Treat Tax Payments like Car Payments
Posted by LWM Team on Thu, Apr 15, 2010
Consumers are accustomed to paying off cars over a set period of time. Taxpayers have this same option when it comes to taxes.
The IRS makes it easy to participate in paying off taxes. An electronic service allows taxpayers to apply online for a payment agreement, also known as an installment agreement. The online application was made available in October 2009 and approximately 3,000 taxpayers made use of it. According to the IRS, more than 75% of filers are entitled to apply for an installment agreement online. To qualify, a taxpayer must not owe more than $25,000 in interest, combined tax and penalties.
Many taxpayers are finding it hard to put together even a little bit of the $25,000 by the due date of Tuesday, April 17, 2010. In such an instance, the installment agreement is a suitable option.
To avoid interest and penalties building up consider paying off your taxes over 120 days. This is a short term extension with no fee. Your other option is to pay off your taxes every month. If you decline to pay via direct debit from a bank account your fee could rise to $105 as opposed to $52 for direct debit agreements. It’s possible to bring the fee down to $43 if you are in a low income bracket. Before 2007, all taxpayers paid $43. The IRS took a lesson from credit card companies and came up with a plan to gain more in service charges.
If you owe more than $25,000 you may not apply online for a payment plan. A paper form 9465 must be completed. You may also be requested to declare your assets on form 433F. Like your car payment agreement, your tax installment agreement must be paid on time every month or you will be penalized with extra fees and interest. The IRS also has the power to file tax liens or take tax levy action against a defaulting taxpayer.