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6 Options for Paying Your Federal Taxes

October 21, 2011 By

For employees, taxes are usually withheld by your employer on a monthly basis. You may however, need to pay any balance due after preparing your tax returns. People in self-employment will need to calculate quarterly installment taxes as the year goes by and finally settle any outstanding taxes for a given year by the 15th of April the following year. There are various options available to enable you to make these tax payments to the IRS. Below are six of these options:

1. Payment by Check or Money Order

One of the ways that you can settle your outstanding tax bill is by writing out a check to the IRS and having it posted to the IRS office. You can attach the check to your tax returns. Ensure that the amount on the check is the same as that of the outstanding taxes as indicated in the return to enable easier verification. You can also send a check or money order at any other time within the year to settle outstanding taxes. You will need to indicate your name – or names for those who file jointly – your Social Security number (for joint-filers, indicate both the numbers included in your tax returns), physical address, telephone number, and the tax year that the check is settling taxes for. You can get the address of where to send the check from the IRS website. You can also drop the check at the nearest IRS office in person.

2. Electronic Funds Transfer

Another option available to settle your due taxes is by an electronic funds transfer. The IRS provides a system to facilitate this process, referred to as the Electronic Federal Tax Payment System (EFTPS). You can pay taxes or schedule payments through this system. You can access the system from the website at eftps.gov or by calling the toll free IRS number at 800-555-4477.

3. Installment Payment Options for Taxes below $25,000.00

If you owe taxes of less than $25,000.00, you can set up an installment payment plan through the IRS website. This online service is referred to as the Online Payment Agreement (OPA). The service will enable you to pay off the due taxes in monthly installments as opposed to making a lump-sum payment. You will however, be charged interests and late payment fees. You can also set up the installment payment plan by filing IRS Form 9465, “Installment Agreement Request Form”. The IRS will get back to you in response to the filed form and will give you the details of the installment payment plan.

4. Installment Payment Options for Taxes above $25,000.00

If the taxes owed are more than $25,000.00, you will need to file Form 433F, “Collection Information Statement” to be considered for a installment payment plan. The form requires you to provide details of your financial assets and other finance related information. You will also need to attach various support documentations for your finances. The IRS then reviews your specific financial situation and determines the amount of installments to be paid on a monthly basis.

5. Credit Card Payments

Another option available to settle your tax bill is by using your credit card. The IRS has outsourced the credit card payment service to three private companies and you can choose to pay from these various vendors. These three companies are Link2Gov, RBS WorldPay Inc., and Official Payments Corporation. You can make payments either by calling their telephone number or through their website. Note that these companies charge you for this service.

6. Short-Term Delayed Payment

If you do not have money by the time the taxes are due, you can call the IRS’s toll free number and request for some extra time to raise the funds. Usually, the IRS agents may give you up to 120 days to settle the taxes with no interest or penalties. You will however, need a good, justifiable reason or explanation to qualify for this grace-period extension.

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IRS Payment Options if you are Unable to Pay Taxes Due

September 2, 2011 By

If you find yourself in a situation where you are unable to meet your due taxes before the tax deadline, do not despair. There are available options that you can take advantage of to ensure that you do not agitate Uncle Sam. Here is what to do if you find yourself in such a situation:

File a Tax Return

Ensure that you file a tax return, even if you are unable to pay off the due taxes immediately. There are worse consequences if you do not file the return. Not filing amounts to more tax troubles and may even surmount to criminal implications.

Consider Various Options for Paying your Due Taxes

Once you have filed your tax returns, you need to plan on how you will pay the taxes due. Depending on the amount of taxes that are owed, you may consider the following options for delayed payments:

  • Request for Short Delay – If you will have the funds to pay the taxes within 120 days, then you may call the toll-free IRS number and request for a short delay. The IRS customer service representatives handling such issues are permitted to make an interest and penalty free extension of up to 120 days if you provide a good reason for the delay.
  • Installment Agreement – If the amount you owe is below $25,000.00 and you are not able to pay it all in one lump-sum, you can apply for an installment agreement under the Online Payment Agreement service available on the IRS website. You can also call the toll-free IRS number to set up this installment agreement. The installment agreement is automatic for any taxpayer who owes below $25,000.00 and you can determine the installments to pay as long as you will repay within the required period. This installment agreement also has an extra advantage – you will not be requested to provide financial statements or any further paperwork. However, you will need to pay interest on the taxes due and late payment penalties. The interest rate for tax debt to the IRS is currently at 4% and is subject to change every three months. The late fee is currently 0.25% for Installment Agreements and 0.5% for tax debts outside IRS payment agreements.
  • Consider Borrowing – You can also consider taking a loan to clear your due taxes. However, you will need to compare the amount to pay if you took up a loan against making late payments through installments. Depending on your loan terms, you can check if the loan interest will amount to more than what the IRS will charge in interest and lateness fees. If the loan interest rate is less than that of the IRS’s deal, then it would be advisable to take the loan and pay off your taxes. However, if it is cheaper to take the IRS Installment Agreement, you should not be hesitant as there is no recourse to taking the agreement.
  • Prioritize Between State and Federal Taxes – If you owe both Federal taxes and State taxes, you should also do a comparison of the charges to be levied if you are late on either of the taxes. You can then pay off the taxes that bear more charges in interest and late fees and place an installment agreement with the tax authority with lower charges.
  • Seek Professional Help – If you owe over $25,000.00 or are still unsure about how to handle your tax dilemma, you may consider seeking help from a tax professional on what to do regarding which option to select.

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IRS Payment Options for Those Who Cannot Meet the Deadline

July 18, 2011 By

Taxes due in a given tax year are to be paid on or before April 15th of the following year. However, if you ever find that you cannot pay your due taxes before this deadline, you can still apply for other options of tax payments. You should also ensure that you file your tax returns by the due date. There are 4 options that the IRS provides to individuals who are unable to pay their due taxes by the 15th of April:

1. Extension of the Payment Period

Depending on your financial circumstances, the IRS can extend the tax payment period by 60 to 120 days. To get such an extension, you can apply online via the Online Payment Agreement application section of the IRS website. You can also call the IRS telephone number and request for such an extension. Interests are charged on the tax liability for the period of the extension. However, such interests are very low, especially when compared to other options for extended payments.

2. Installment Payment for Taxes below $25,000.00

The IRS also provides another option for payment specifically for those whose tax debt is significantly large and cannot manage to pay off the tax liability in a lump-sum payment. If the taxes owed are less than $25,000.00, including penalties and interest, then one can apply for an Online Payment Agreement to have the tax liability paid over a period of 5 years. For this type of installment agreement, the approval is almost immediate and one can designate the amount of installments to pay as long as the installments will allow the debt to be paid off within 5 years. The agreement does not require any paperwork, such as remittance of financial information, to the IRS. Apart from applying online, you can also apply for this type of installment agreement by calling the IRS telephone number, by making a written request to the IRS, or by filing Form 9465, “Installment Agreement Request Form”.

3. Installment Payment for Taxes above $25,000.00

If you owe more than $25,000.00 in taxes, you will need to contact the IRS and provide all your financial details in a financial statement. These details include your paystubs, bank statements, list of assets and debts, and other financial documentation. The IRS then reviews your financial portfolio and determines the amount of tax payments that you will pay per installment.

4. Credit Card and Debit Card Payments

The IRS has also provides a platform where any taxpayer can now pay their taxes by either debit card or credit card. Therefore, if you still owe taxes by the tax deadline, you can use your credit card to make the payments. The IRS has outsourced the facilitation of the credit and debit card payment to three private companies. These companies are Link2Gov Corporation, Official Payments Corporation, and RBS WorldPay, Inc. You can make your tax payments through the websites of these companies. The IRS does not charge any fee for credit card and debit card payments. However, each of these private companies charges a convenience or flat rate fee.

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Marlee Matlin Seeks IRS Installment Plan to Pay Tax Liability

June 6, 2011 By

Tax scandals are a norm in the lives of many celebrities. When a tax scandal erupts, it especially comes with a reputation risk and huge embarrassment to such celebrities. One of the latest celebrity “victims” of scandal is an Academy Award winning actress who got herself in a $50,000.00 tax liability for her 2009 returns. The famous deaf actress, who recently appeared on a famous reality show where she wanted to become an “apprentice” for a certain famous mogul, downplayed the tax debt as a common thing in the U.S. and stated that she was already paying off the liability. According to sources, the actress is paying off the tax liability through an IRS installment payment plan. She hopes to use the funds that she is set to earn through various TV shows that she is currently involved in to pay her debts to Uncle Sam.

Besides the funds that she is currently seeking to earn, the actress is also aiming to sell off her house and also transfer her kids from private school to public school in order to raise more money to settle her tax liability. The actress, who filed taxes jointly with her police-officer husband, says that her tax liability did not arise from living a flamboyant Hollywood life but rather, it was her poor budgeting that let her finances get way out of hand. She lamented that being an actress and earning income in a haphazard way made financial and tax planning much more complicated as compared to people who earn a consistent and steady paycheck.

The IRS installment payment plan will enable the couple to pay off their tax liability in installments that are more affordable over span of a couple of years. The installment payment plan is available to all taxpayers who cannot afford to pay off their tax liabilities in a lump-sum. However, interests and penalties will continue to accrue, even within the repayment period. To qualify for an installment plan, you will need to call the IRS and request to be placed on an Installation Agreement. There are different options of installment plans that are available from the IRS.

If you owe over $25,000.00, you will need to negotiate with the IRS for a repayment plan. The IRS will require you to fill out Form 433F, “Collection Information Statement Form” detailing all your assets, pay stubs, bank records, and a myriad of other information. In case you do not manage to keep to the installment plan and pay on time and accordingly, the IRS can easily pursue your assets and place liens as they have all your financial information.

Either way, IRS payment plans give a chance for an individual with a huge tax liability to pay it off in manageable installments and avoid having liens placed on their assets and having other financial battles with the IRS.

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Is It Time to Hire a Tax Lawyer?

April 19, 2011 By

If you are in trouble with the IRS, there are several important factors to consider before choosing representation. Consider the level of involvement of the IRS in your issue thus far.

If the IRS is going to audit you because they believe your taxes were fraudulently filed, a tax lawyer will be able to advise you on what to do to avoid severe penalties of up to 75% of taxes you owe. If you owe taxes and paying them will create severe hardship for you, you may be able to enter into an Offer in Compromise agreement with the IRS which will allow you to pay less than your full debt. Although you can get an Offer in Compromise without representation, a tax attorney will be able to increase your offer’s chance for acceptance. In the event that your offer is not accepted, your attorney can advise you on your other options.

You may have a lien placed on your assets or your wages may be garnished because of failure to pay your taxes. With a lien or wage garnishment, the IRS attempts to gain back the value of the taxes you have yet to pay. A tax attorney can help you by getting the lien or wage garnishment removed. If the IRS has already audited your tax returns and determined they were fraudulently filed, a tax attorney can help you get the resulting penalties removed.

To find the best tax lawyer for your needs, do your research. Many attorneys offer free consultations, which is a great opportunity to assess whether you are compatible with that tax lawyer. It may also help to ask others who have had tax problems, and it is essential to make sure they have experience, the proper education, and are a member of the state bar.

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No Questions Asked – Streamlined IRS Installment Agreement

January 17, 2011 By

If your income tax liability to the IRS is under $25,000, you should consider an installment agreement. These streamlined agreements are available to anyone whose income tax debt is lower than $25,000 and can pay their balance in five years. The installment agreements are streamlined because if you meet the qualifications, you will enter into that repayment plan with no questions asked.

There are several advantages to an installment agreement of this type. First, it really is a streamlined process. A streamlined installment agreement with the IRS means simplicity. You just have to call, tell them you owe under $25,000, and want to pay it under five years using a streamlined process.

Second, there really are no questions asked. You do not have to fill out a financial statement, which means you do not have to provide any documentation of your finances. You do not have to disclose where you work, where you bank, or your assets. Normally when you enter into an installment agreement, you have to provide personal documents like bank statements, recent paystubs, and verification of your living expenses.

Third, since the process is streamlined and since there is no documentation required – meaning easier for you and easier for the IRS – the IRS will not apply financial standards to your living expenses. Typically, financial standards apply, which means they are likely to ask you to pay an amount which is higher than what you can realistically afford. Since you do not have to give the IRS documentation of everything, and since the process is streamlined, you will save time and money. Your payments will be less, and the hassle will be less. This is a great way to negotiate with the IRS to make the process easier on both of you and to make the IRS happy by entering into a set payment plan.

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IRS Installment Plan: Short of Perfect

November 9, 2010 By

Installment Payment Plans by IRS Are Not Perfect

It is a known fact there are procedural difficulties in IRS collection cases. Tax professionals are fully aware these difficulties result in delays. Delays cost the taxpayer time and money because, typically, the taxpayer and the IRS come to an agreement that doesn’t suit the unique circumstance of the taxpayer.

Tax professionals have noticed it is common for the IRS to agree to an IRS installment plan with a taxpayer who can pay their bill in full or the IRS expects a taxpayer with no earnings to enter into a payment plan. This mismatch arises because there are IRS officials who are not sufficiently trained and knowledgeable. The IRS is a massive bureaucracy that often results in errors and poor judgment; it is impossible to get one-on-one personal service from the IRS.

A qualified tax professional will have the expertise to assess whether or not a specific IRS official has the training and knowledge to deal with a taxpayer’s situation. A tax professional will be able to make a distinction between an IRS official who is incompetent and one who is efficient and knowledgeable.

Due to the size and imperfections of the IRS, its officials cannot provide a service to the public that is of a consistently high standard. It is becoming even more difficult for the IRS to improve due to its determination to shut the tax gap. This decision was made in order to assist in the payment for the federal shortfall quadrupling.

A TIGTA study found seventeen of fifty seven installment cases were recognized so that taxpayers with financial means could settle their tax bill in full. By doing this, they could steer clear of the charge for an installment contract, penalties and interest.

A tax payer has a much higher chance of saving both time and money if a tax professional negotiates with the IRS on his or her behalf.

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Cost of an IRS Installment Agreement

October 4, 2010 By

What affects the cost of my IRS Installment Agreement?

The IRS factors in specific allowances on various expenses and decides what your cash flow is to determine how much you will pay per installment. Generally speaking, the higher the IRS values the cash flow to be, the more you have to pay for every installment. The problem, however, is that the IRS only looks at certain expenses, meaning if you spend a lot on something outside of what they view as ‘essential’, you could find yourself in trouble. For example, credit card payments are often not allowed.

Depending on the situation, the IRS will give you one year to get rid of any un-allowed expenses (i.e. credit card payments) before installment agreements start should the expense make it impossible for you to pay them.

So what expenses are allowed? Food, clothing and products you need to meet a basic standard of living (hygiene products, household cleaning products etc) are allowed and no matter what your circumstances, you get a minimum allowance (if you feel you need more, you have to prove why).

The allowance you get for bills such as rent, mortgages, insurance, electricity etc depends on where you live and how many people live in your house. Very often, this allowance is not enough, however you need special circumstances in order to increase it.

Medical insurance payments are allowed, regardless of the cost. Prescriptions and other medical payments are $60 per month for individuals under the age of 65 and $144 for people younger than 65. Again, if you need more, you have to prove it.

Unfortunately, paying an IRS installment agreement can mean having to go through a Chapter 7 or 13 bankruptcy. The most important thing to do with these expense limitations is to ensure you get all the extra expenses you can in order to avoid serious financial problems.

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IRS Penalties: Defaulting on your Installment Agreement

September 3, 2010 By

Don’t break your deal with the IRS!

When you set up an installment agreement, you are making a deal with the IRS by which you are telling them you will be making monthly payments towards paying off your tax debt within a certain time period. However, if you do not fulfill your agreement, you will end up with an IA (Installment Agreement) default.

When the IA default occurs, you will receive a notice of default from the IRS (entitled as a ‘Notice of Levy’). Once you have received this, you are given exactly 30 days to make an appeal against it so you can negotiate with the IRS about an installment agreement. Otherwise, the IA default will be enforced and your installment agreement with the IRS will end after the 30-day period and they will try to collect what you owe!

So long as you file the appeal within the 30-day period, your installment agreement will be valid until your case has been heard and a decision has been made, in accordance with the law.

If you win your case, your negotiations with the IRS will protect your assets, your income, and your bank account from being levied while they are taking place. During this time, you should ensure you give the IRS up-to-date information about your financial situation, which hopefully will stop the IA default from being enforced.

If you have no ability to pay the IRS back and your appeal is rejected, you should consider other options, such as an offer in compromise, filing for uncollectible status or declaring yourself bankrupt. These can be effective alternatives however; the best option depends entirely on your personal situation.

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IRS Installment Plan: Benefiting the Rich and Famous

August 12, 2010 By

Zsa Zsa Gabor

 A lot of money separates regular taxpayers from those with lots of money. Having a lot of fame and money does not mean taxes get paid. In fact, it is generally ordinary citizens who get their taxes paid and not the wealthy. Even though there are those with the advantage of great wealth they are still entitled to the same solutions available to taxpayers who don’t. No matter how much or how little money you have the IRS allows you to have an installment payment plan.

It is highly likely that getting into trouble with the IRS would lead to a tax lien. A famous personality who did get into trouble is the Hungarian born actress, Zsa Zsa Gabor. Her tax trouble amounted to more than $118,000 that resulted in a tax lien. The reason for the lien was because the actress did not pay in full in the years 2001 and 2002.

Ms Gabor has let it be known there is a third party involved. As far as her advisers are concerned Bernie Madhoff and his Ponzi scheme are to blame for Zsa Zsa Gabor losing $7 million and therefore her tax problem is a direct spin-off. Ms Gabor and her spouse are joining their funds and devising an installment plan with the IRS.

As soon as you realize you owe the IRS money take action to avoid a tax lien. Negotiate a payment plan (also known as installment plans or payment options) with the IRS. The IRS is amenable to such a plan. There preference is to get the money quickly but, if you can’t, a payment plan is the best solution. A payment plan means they don’t have to keep track of you. However, be aware. Such a plan does accumulate interest charges and a penalty for payments later than 15 April.

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