Tag Archives: EFTPS

Eleven Tips for Taxpayers Who Owe Money to the IRS

Most taxpayers get a refund from the Internal Revenue Service when they file their tax returns. For those who don’t get a refund, the IRS offers several options to pay their tax bill.

Here are eleven tips for taxpayers who owe money to the IRS.

1. Tax bill payments  If you get a bill from the IRS this summer that shows you owe late taxes, you are expected to promptly pay the tax owed including any penalties and interest. If you are unable to pay the amount due, it may be better for you to get a loan to pay the bill in full rather than to make installment payments to the IRS. That’s because the interest rate and penalties the IRS must charge by law are often higher than what lending institutions may be offering.

2. Electronic Funds Transfer  You can pay your tax bill by electronic funds transfer, check, money order, cashier’s check or cash. To pay using electronic funds transfer, use the Electronic Federal Tax Payment System by either calling 800-555-4477 or using the online access at www.eftps.gov.

3. Credit card payments  You can pay your bill with a credit card. Again, the interest rate on a credit card may be lower than the combination of interest and penalties the IRS must charge. To pay by credit card contact one of the following processing companies:

– WorldPay US, Inc. at 888-9PAY-TAX (or www.payUSAtax.com),

– Official Payments Corporation at 888-UPAY-TAX (or www.officialpayments.com/fed), or

– Link2Gov Corporation at 888-PAY-1040 (or www.pay1040.com).

4. Additional time to pay  Based on your circumstances, you may be granted a short additional time to pay your tax in full. A brief additional amount of time to pay can be requested through the Online Payment Agreement application at IRS.gov or by calling 800-829-1040. There generally is no set up fee for a short-term agreement.

5. Installment Agreement  You may request an installment agreement if you cannot pay the total tax you owe in full. This is an agreement between you and the IRS to pay the amount due in monthly installment payments. You must first file all required returns and be current with estimated tax payments.

6. Apply Using Form 9465  You can complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill using the envelope you received from the IRS. The IRS will inform you (usually within 30 days) whether your request is approved, denied, or if additional information is needed.

7. Apply Using Online Payment Agreement  If you owe $50,000 or less in combined tax, penalties and interest, you can request an installment agreement using the Online Payment Agreement application at IRS.gov. You may still qualify for an installment agreement if you owe more than $50,000, but you are required to complete a Form 433F, Collection Information Statement, before the IRS will consider an installment agreement.

8. User fees  If an installment 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 lower incomes, the fee can be reduced to $43.

9. Offer in Compromise  IRS is now offering more flexible terms with its Offer-in-Compromise (OIC) Program. An OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax debt for less than the full amount owed. An OIC is generally accepted only if the IRS believes, after assessing the taxpayer’s financial situation, that the tax debt can’t be paid in full as a lump sum or through a payment agreement.

10. Check withholding  Taxpayers who have a balance due may want to consider changing their Form W-4, Employee’s Withholding Allowance Certificate, with their employer.

11. Fresh Start  The IRS has a program to help struggling taxpayers get a fresh start. Through the Fresh Start program, individuals and small businesses may be able to pay the taxes they owe without facing additional or unnecessary burden.

Tax On Wheels, LLC is available to assist you if the need arises.  Give us a call anytime at 803 732-4288.

E-Pay Options Available to People Facing April 17 Deadline; Penalty Relief for Unemployed Taxpayers; Expanded Payment Plans for Those Who Can’t Pay

WASHINGTON — The Internal Revenue Service today reminded taxpayers that 2011 federal income tax returns, extension requests and tax payments are due by April 17, 2012. For people unable to pay their taxes in full by that date, payment agreements and other relief are usually available and can even be requested online.

Taxpayers will avoid late filing penalties if they file either their income tax return or a request for a tax-filing extension by midnight on Tuesday. The late-filing penalty, normally five percent per month based on the unpaid balance, applies to returns filed after the deadline. Taxpayers should file, even if they can’t pay the full amount due.

Any payment made by April 17 will reduce or eliminate interest and late-payment penalties that apply to payments made after that date. The current interest rate is three percent per year, compounded daily, and the late-payment penalty is normally 0.5 percent per month.

Whether paying tax in full or in part, the fastest and easiest way to do so is by using one of the electronic payment options. E-pay options include:

• Electronic Federal Tax Payment System (EFTPS). This free service gives taxpayers a safe and convenient way to pay individual and business taxes by phone or online. To enroll or for more information, call 800-316-6541 or visit eftps.gov.

• Electronic funds withdrawal. E-file and e-pay in a single step.

• Credit or debit card. Both paper and electronic filers can pay their taxes by phone or online through any of several authorized credit and debit card processors. Though the IRS does not charge a fee for this service, the card processors do. For taxpayers who itemize their deductions, these convenience fees can be claimed on Schedule A Line 23.

Taxpayers who choose to pay by check or money order should make the payment out to the “United States Treasury.” Write “2011 Form 1040,” name, address, daytime phone number and Social Security number on the front of the check or money order. To help insure that the payment is credited promptly, also enclose a Form 1040-V payment voucher.

In many cases, those struggling with unpaid taxes qualify for one of several relief programs, including those recently expanded under the IRS “Fresh Start” initiative. These include the following:

• Most people can set up a payment agreement with the IRS on line in a matter of minutes. Those who owe $50,000 or less in combined tax, penalties and interest can use the Online Payment Agreement to set up a monthly payment agreement for up to six years. Taxpayers can choose this option even if they have not yet received a bill or notice from the IRS. Alternatively, taxpayers can request a payment agreement by filing eft. This form can be downloaded from IRS.gov and mailed along with a tax return, bill or notice.

• Most unemployed filers and self-employed individuals whose business income dropped substantially can apply for a six-month extension of time to pay. Eligible taxpayers will not be charged a late-payment penalty if they pay any tax, penalty and interest due by Oct. 15, 2012. Taxpayers qualify if they were unemployed for any 30-day period between Jan. 1, 2011 and April 17, 2012. Self-employed people qualify if their business income declined 25 percent or more in 2011, due to the economy. Income limits and other special rules apply. Apply using Form 1127-A.

• Some struggling taxpayers may qualify for an offer-in-compromise. This is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. Generally, an offer will not be accepted if the IRS believes the liability can be paid in full as a lump sum or through a payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay.

Details on all filing and payment options are on IRS.gov.

Please contact Tax On Wheels, LLC at 803 732-4288 if you need assistance with these or any other tax issues.

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