The vast majority of Americans get a tax refund from the IRS each spring, but what do you do if you are one of those who have received a tax bill? What do you do if you owe money to the IRS and can’t pay?
The IRS encourages you to pay the full amount of your tax liability on time. If you get a bill for late taxes you are expected to promptly pay the tax owed including any additional penalties and interest. It is often in your best interest to get a loan to pay the bill in full rather than to make installment payments to the IRS. You can also pay the bill with your credit card. The interest rate on a credit card or bank loan may be lower than the combination of interest and penalties imposed by the Internal Revenue Code.
You can pay the balance owed by credit card, electronic funds transfer, check, money order, cashier’s check, or cash. To pay by credit card contact either Official Payments Corporation at 800-2PAYTAX (also www.officialpayments.com) or Link2Gov at 888-729-1040 (also www.pay1040.com). To pay using electronic funds transfer you can take advantage of the Electronic Federal Tax Payment System (EFTPS) by calling 800-555-4477 or 800-945-8400 (also www.eftps.gov).
An installment agreement may be requested if you cannot pay the liability in full. This is an agreement between you and the IRS for the collection of the amount due in monthly installment payments. To be eligible for an installment agreement you must first file all returns that are required and be current with estimated tax payments. If you are an employer you must be current with your federal tax deposits.
If you owe $25,000 or less in combined tax, penalties, and interest, you can request an installment agreement using the web-based application, Online Payment Agreement (OPA), found on the Internet at IRS.gov. Or, you can complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill in the envelope that you have received from the IRS. The IRS will inform you within 30 days whether your request is approved, denied, or if additional information is needed.
You may still qualify for an installment agreement if you owe more than $25,000, but a Form 433F, Collection Information Statement, may need to be completed.
If an agreement is approved, a one-time user fee will be charged. The user fee for a new agreement is $105 or $52 for agreements where payments are deducted directly from your bank account. For eligible individuals with incomes at or below certain levels, a reduced fee of $43 will be charged.