Three Ways to Pay Your Federal Income Tax
If you owe taxes but can’t pay the full amount by the April 18 deadline you should still file your return on time and pay as much as you can to avoid penalties and interest. You should also contact the IRS to ask about alternative payment options. Here are three alternative payment options you may want to consider:
1. 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 http:www.IRS.gov or by calling 800-829-1040. Taxpayers who request and are granted an additional 60 to 120 days to pay the tax in full generally will pay less in penalties and interest than if the debt were repaid through an installment agreement over a greater period of time.
2. Installment Agreement You can apply for an IRS installment agreement using the Web-based Online Payment Agreement application on IRS.gov. This Web-based application allows taxpayers who owe $25,000 or less in combined tax, penalties and interest to self-qualify, apply for, and receive immediate notification of approval. You can also request an installment agreement before your current tax liabilities are actually assessed by using OPA. The OPA option provides you with a simple and convenient way to establish an installment agreement and eliminates the need for personal interaction with IRS and reduces paper processing. You may also complete and submit a Form 9465, Installment Agreement Request, make your request in writing, or call 1-800-829-1040 to make your request. For balances over $25,000, you are required to complete a financial statement to determine the monthly payment amount for an installment plan. For more complete information see Tax Topic 202, Tax Payment Options on http.www.IRS.gov.
3. Pay by Credit Card or Debit Card You can charge your taxes on your American Express, MasterCard, Visa or Discover credit cards. Additionally, you can pay by using your debit card. However, the debit card must be a Visa Debit Card, or a NYCE, Pulse or Star Debit Card. To pay by credit card or debit card, contact one of the service providers at its telephone number or Web site listed below and follow the instructions. There is no IRS fee for credit or debit card payments, but the processing companies charge a convenience fee or flat fee. If you are paying by credit card, the service providers charge a convenience fee based on the amount you are paying. If you are paying by debit card, the service providers charge a flat fee of $3.89 to $3.95. Do not add the convenience fee or flat fee to your tax payment.
The processing companies are:
Link2Gov Corporation:
To pay by debit or credit card: 888-PAY-1040 (888-729-1040), www.pay1040.com
RBS WorldPay, Inc.
To pay by debit or credit card: 888-9PAY-TAX (888-972-9829), www.payUSAtax.com
Official Payments Corporation:
To pay by debit or credit card: 888-UPAY-TAX (888-872-9829), www.officialpayments.com/fed
For more information about filing and paying your taxes, visit http:www.IRS.gov and choose 1040 Central or refer to the Form 1040 Instructions or IRS Publication 17, Your Federal Income Tax. You can download forms and publications at http://www.irs.gov or request a free copy by calling 800-TAX-FORM (800-829-3676).
Links:
April 18 Deadline Approaching; Check IRS Payment Options
Videos: Owe Taxes But Can't Pay?: English | Spanish | ASL
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WASHINGTON — The Internal Revenue Service today reminded taxpayers who have not yet filed their 2010 tax returns that individual returns and payments are due next Monday, April 18, 2011.
There are several payment options available to taxpayers who have a balance due.
Payments can be made by:
Detailed information on each of the first three payment types can be found on the IRS.gov Electronic Payment Options Home Page.
Some taxpayers who itemize their deductions may be eligible to claim as a miscellaneous itemized deduction the convenience fee charged to pay individual income taxes by credit or debit card.
Taxpayers who pay by check or money order should make the payment out to the “United States Treasury.” The tax year, form number and Social Security number should all be included on the check or money order. Also, include Form 1040-V, Payment Voucher, along with the payment and tax return. If you have already submitted your tax return but still need to pay all or some of the balance, you may mail the check or money order to the IRS with Form 1040-V.
For members of the military and others serving in combat zones, the filing and payment deadline is normally postponed until at least 180 days after the service member leaves the combat zone, so the April 18 deadline to file and pay does not apply. If you are eligible, you get the extra time without having to ask for it.
Avoid Penalties and Interest
If you have a balance due, it’s important to pay your tax bill by April 18 to avoid penalties and interest. But even if you cannot pay your entire bill, pay as much as you can to minimize penalties and interest.
Installment Agreements
For those taxpayers who cannot pay in full by April 18, an installment agreement may be appropriate. Several options are available for setting up a payment agreement with the IRS:
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Most people can set up a payment agreement on line in a matter of minutes. Those who owe $25,000 or less in combined tax, penalties and interest qualify to use the Online Payment Agreement (OPA). You can choose this option even if you have not yet received a bill or notice from the IRS. For details, refer to What Information Do I Need to Use OPA?
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File Form 9465 (PDF), Request for Installment Agreement. This form can be filed electronically along with your return or downloaded from IRS.gov and mailed along with your paper return. If you have received a tax bill, mail your completed form to the address on your bill.
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Call the number on the bill or notice you received from the IRS. Make sure you have the bill or notice handy along with your Social Security number.
Offers in Compromise
The IRS recently expanded the streamlined Offer in Compromise program, which now covers taxpayers with annual incomes of up to $100,000 and tax liabilities up to $50,000.
An Offer in Compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. It is subject to acceptance based on legal requirements. Generally, the IRS will not accept an offer if it believes the liability can be paid in full as a lump sum or through a payment agreement. Prior to approval, the IRS examines the taxpayer’s income and assets to determine the taxpayer’s ability to pay.
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