More Time to Pay
by Bob Williams
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Here we are into the fall season, and we find ourselves a rock’s throw away from the October 15 income tax filing deadline. Keep in mind, this is THE deadline, the final stop for this train. There are no more extensions from here on in 2014.
But what if the problem isn’t filing your taxes, but paying them? Can you file when you don’t have the resources to pay up?
Actually, you can.
Whether it’s April 15 or October 15, two basic rules apply: File your return before the deadline and pay as much tax due as you can when you file on 1040.com. Even if you can’t pay the entire tax bill, paying as much as you can now may get you off the hook later for at least some of the interest and penalties the IRS might assess for paying late.
The system works like this: When you e-file your return, if you have tax due, you pay as much of that tax bill as you can. If that isn't all of it, the IRS will send you a bill for the remainder. At that point, you can request an installment payment agreement to pay off the tax bill in regular amounts.
There are limits to the IRS installment agreement. Your tax debt has to be less than $50,000 in combined tax, penalties and interest.
Another thing to keep in mind about an IRS agreement: is you skip payments – for whatever reason – the entire deal could be scrapped (and then you're back to owing the full amount immediately). The best method is to set up an automatic bank debit for the payment, so you don't forget to write the check or have to rely on the mail to get it to the IRS on time.
Applying for a payment agreement is pretty simple. Click here to go to the IRS's online application. You’ll need your letter from the IRS (if you have one), your bank account information (including account number and bank address), and a copy of your tax return. Be ready to indicate how much you can pay, and when you can pay it.
There are fees for setting up a payment agreement. Most taxpayers will pay either $120 – for a standard agreement or payroll deduction – or $52 for a direct debit arrangement. The cost drops to $43 for low-income taxpayers.
While an installment agreement doesn’t take away your tax debt, it can give you a few more options on the road to clearing it up. And we can get a little farther down that road by relying on our own two feet if we can.
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