If you’re in the situation of owing money after filing your taxes but lacking the funds to pay your tax bill, various alternatives are available. Exploring these options is important to determine the best course of action for your specific circumstances.
Attempt Short Term Tax Bill Payment
Exploring Payment Solutions for Your Tax Bill: If circumstances have made it difficult for you to settle your tax dues promptly, there are alternative approaches available. One option is to submit your tax paperwork as usual and subsequently apply for an extension to meet the payment deadline. This extension can grant you a grace period of up to 180 days to fulfill the financial obligation.
Should you find yourself in need of a short-term payment plan, rest assured that there are no fees associated with setting one up. However, it’s important to note that interest and penalties will be added to the total taxes owed until they are fully settled.
Should you find yourself facing financial strains, you might be eligible for an extension by submitting Tax Form 1127, Application for Extension of Time for Payment of Tax Due to Undue Hardship. Remember, to secure either extension, it is crucial to submit your income tax return promptly before the tax deadline.
Attempt a Tax Bill Long-term Installment
When faced with a tax bill that cannot be paid at once, a popular solution is to establish an installment plan, spreading the tax debt payments over a period of six years.
Should your total tax, penalties, and interest amount to $50,000 or less, and you have fulfilled all necessary tax filings, you are eligible to apply for a tax bill installment agreement through the IRS Online Payment Agreement Application available on the website.
When setting up a long-term installment agreement with the IRS, a one-time setup fee is required, along with ongoing interest and penalties on the outstanding tax debt until fully repaid. Throughout the duration of the installment plan, the interest and late payment penalties are reduced from .5% to .25% per month, providing some relief for taxpayers managing their tax liabilities.
When establishing a long-term installment agreement with the IRS, there is a setup fee involved, along with the application of interest and penalties on the outstanding taxes until they are fully settled. Throughout the duration of the tax bill installment agreement, the monthly failure-to-pay rate decreases from 0.5% to 0.25%, reducing the financial burden on taxpayers as they work towards paying off their tax debt.
Upon submitting your application, it is customary for the IRS to provide a response regarding your installment agreement request within a 30-day timeframe. The IRS has multiple convenient options available for facilitating payments through an installment agreement.
– Online Payment Agreement (OPA)
– Electronic Federal Tax Payment System (EFTPS)
– Payroll Deduction from Employer
– Check or Money Order Payment
– Credit Card Payment
– Direct Debit from Bank Account
When seeking an installment agreement through the IRS Online Payment Agreement Application and opting for automatic monthly payments from your bank account, a setup fee of $31 applies for online applications, while a fee of $107 is charged for applications made via phone, mail, or in-person.
When establishing an installment agreement with payments processed through methods other than direct debit and completing the application online, there is a possibility of incurring a $130 set-up fee.
Considering an online amendment for an existing installment agreement will incur a $10 fee while opting for phone, mail, or in-person revisions will cost $89.
Currently, the most efficient choice is to submit an online amendment to avoid potential delays when requesting installment plan revisions through mail or phone.
When setting up your installment plan, it’s crucial to ensure that the tax bill monthly payment aligns with your financial capacity to avoid any potential defaults. You must clearly indicate both the fixed amount and the specific date within the month for each payment to be processed, allowing flexibility between the 1st and the 28th of the month.
Offer In Compromise
To initiate an Offer in Compromise, a nominal application fee of $205 is required. Through an OIC, individuals can negotiate a settlement with the IRS to pay a reduced sum of their tax liabilities, which the IRS acknowledges as a complete fulfillment of the debt.
Before being eligible for an Offer in Compromise (OIC), it is necessary to ensure that all necessary filings and payments are up to date. Furthermore, individuals in the midst of bankruptcy proceedings are not qualified for an OIC.
In the event that you qualify for Low-Income Certification as an individual, there is no need to include any payment with your offer. Should your financial constraints be attributed to enduring circumstances like unemployment or business closure, you have the option to request an offer in compromise (OIC) from the IRS.
Temporary Delay Tax Bill
In situations where you anticipate being unable to settle your entire tax debt for an extended period, rather than just a temporary setback, this particular agreement could be essential.
In situations where individuals are unable to settle their tax debts, their account may be labeled as “currently not collectible,” signifying that the IRS could grant permission to postpone collection activities temporarily, giving time for financial circumstances to improve.
In the event that a debt is classified as presently uncollectible, it signifies that the IRS has ascertained your current inability to settle the debt. To proceed with postponing collection, you should submit a Collection Information Statement Tax Form 433-F, Tax Form 433-A, or Tax Form 433-B and substantiate your financial circumstances.
Rest assured, understanding intricate tax regulations is not a concern. Regardless of the financial decisions you made in the previous year, RapidTax promises to maximize their impact on your tax return. Whether you prefer to tackle your taxes independently or opt for the expert assistance of a dedicated RapidTax Tax Professional, our priority remains securing every entitlement you are owed, ensuring you receive the most substantial refund possible.
