The IRS provides tax tips on various topics. The latest tip is for those taxpayers who owe money to the IRS.
For various reason taxpayers end up with a tax bill that they are unable to pay immediately. It could be, that the taxpayer started a business as a sole proprietor or partnership and did not anticipate or plan for self employment taxes. The business may have been unexpectedly more profitable than anticipated. It could simply be that the taxpayer lost a job and had to make adjustments to pay for their monthly expenses rather than worry about taxes.
It does not matter what your reason is for not paying the taxes due, the IRS will go after you unless, you make arrangements to pay the taxes owed. Below are some tips to make arrangements for payments.
- Tax Bill Payment - if you get a bill for late taxes, you are expected to pay the taxes, interest and fines owed promptly. If you are unable to pay the total amount, you may want to get a loan to pay the amount owed.
- Additional Time to Pay - A brief additional amount of time to pay can be requested through the Online Payment Agreement application at www.irs.gov or by calling 800-829-1040.
- Credit Card Payments - Yes, the IRS does accept credit cards. With a credit card you may be able to find a low interest credit card. A low interest credit card may be cheaper than an installment plan with the IRS, and certainly less than continuing to accrue penalties and interest for nonpayment.
- Electronic Funds Transfer - IRS does allow you to pay with an electronic funds transfer, as well as check, money order, cahsier's check and yes, even cash.
- Installment Agreement - If you cannot pay the amount owed in full, the IRS will work out an installment agreement for you. To qualify, you will have to make sure all your tax filings are up to date and others taxes are paid in full. There are several ways to request an installment agreement, including through the Online Payment Agreement, Form 9465, or Form 433F. You can find additional information about applying for an installment agreement at www.irs.gov. If an installment agreement is approved you will be charged a user fee of $105, or $52 for agreements where payments are deducted from your bank account. For eligible individuals with lower income, the user fee may be reduced to $43.
Finally, if you do have a balance due, you may want to consider reducing your W4 withholding allowance. This will increase the amount of taxes withheld from your paycheck.
The website for the IRS is www.irs.gov and their phone number is 800-829-1040.
This past week, Congress passed, and President Obama signed into law legislation to raise the debt ceiling. While republicans were pushing for more spending cuts and Democrats were pushing for tax increases, one issue that was not included in the compromise was an extension of the temporary payroll tax cut for employees.
As we highlighted in a previous post, beginning in January 2011, the Social Security tax that employees pay through payroll deduction, decreased from the historic rate of 6.2% to 4.2%. This tax cut for employees was a temporary one-year tax cut and intended to try and help stimulate the economy.
There was an attempt, as part of the debt deal, to try and extend this payroll tax cut and keep the Social Security tax rate for employees at the 4.2% rate.
At this time, unless a separate bill is enacted or this temporary tax cut is extended as part of another bill, employees will see their take home pay decrease come January.
For more information about payroll taxes, and to learn about what employers and employees are obligated to pay, download our free Payroll Tax Guide Summary by clicking on "Download Now."