Feeding the Wolf
by Bob Williams
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Back in the day, the term “keeping the wolf from the door” meant that we were paying our bills and keeping our heads above the financial waters. Nowadays, though, the imagery isn’t so clear cut.
For whatever reasons – and there are many – sometimes you end up with a balance due on your tax return. What can you do if you don’t have the money to pay?
We may call our friends at the IRS “The Men in Black” from time to time, but truth be told, they’re generally not the uncaring lot they’re made out to be. Mostly.
But even the IRS realizes sometimes taxpayers just don’t have their entire tax bill available at one time. So, being the practical types who understand that even a dripping faucet can fill a bucket, the Internal Revenue Service has a number of ways for us to pay our tax bill. Granted, that tax bill has to be paid. But there are options on how to do it.
For those taxpayers who can take care of their tax due in one transaction, paying electronically is definitely the way to go. If you use either the IRS’ direct debit service or the Electronic Federal Tax Payment System, there’s no service charge. Credit or debit card payments, on the other hand, may carry a fee charged by your credit card provider.
Can’t pay the tax bill in full, but can pay it over time? In that case, apply for a payment plan. Most taxpayers can use the Online Payment Agreement Application on IRS.gov, or download Form 9465, Installment Agreement Request.
A Direct Debit Pay Plan is a sort of hybrid, combining payment plan and direct debit. Basically, this option sets up regular monthly debits from your bank account to pay on your tax due. The benefits to this option are its cost and its ease of use. The IRS set-up fee is less with this plan – $52 vs. $120. And with this choice, there are no checks to write, and no missed payments.
When All Else Fails
Lastly, there is what the IRS calls an Offer in Compromise or OIC. This allows taxpayers to settle their tax debt with the IRS for less than the full amount. An OIC might be an option if the tax bill can’t be paid in full. It may also apply if full payment will actually cause a financial hardship. To see if an Offer in Compromise is one of your options, use the IRS OIC Pre-Qualifier Tool at IRS.gov.
Our experience is that the IRS will work with taxpayers who try to work with them. If you owe tax due, don’t wait to get resolution. Because of penalties and interest, your debt will only grow. Contact the IRS or go online and get started with one of the options we’ve mentioned. You’ll thank us later.
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