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Key Information For Taxpayers Who Owe Money to the IRS

April 2, 2012

While most Americans receive a refund each year from the IRS, there are those who owe and cannot pay the full amount due. For those that find themselves in this situation, the IRS offers alternatives for paying your tax bill. Named the Fresh Start initiative, the IRS developed this program to help individuals and small business meet their tax obligations without adding unnecessary burden. The following tips and general information were developed by the IRS:

1.    Tax Bill Payments v. Loan—If you are unable to pay your current tax bill, it is often in your best interest to get a loan to pay the bill in full rather than making installment payments to the IRS.

2.    Additional Time to Pay—Based on your circumstances, you may be granted a short additional time to pay your taxes in full. Additional time to pay can be requested through the Online Payment Agreement application at www.irs.gov or by calling 800-829-1040.

3.    Credit Card Payments—You can pay your bill with a credit card. The interest rate on a credit card may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. To pay by credit card contact one of the following processing companies:

4.    Electronic Funds Transfer—You can pay your tax balance by electronic funds transfer, check, money order, cashier’s check, or cash. To pay using electronic funds transfer, use the Electronic Federal Tax Payment System by calling 
800-555-4477 or accessing online at www.eftps.gov.

5.    Installment Agreement—You may request set up of an installment agreement between you and the IRS to pay the amount due in monthly installments. You must first file all required returns and be current with estimated tax payments.

6.    Online Payment Agreement—If you owe $25,000 or less in combined tax, penalties, and interest, you can request an installment agreement using the Online Payment Agreement application at www.irs.gov.

7.    Form 9465—You can complete and mail an IRS Form 9465 - Installment Agreement Request along with your bill in the envelope you received from the IRS. The IRS will inform you (usually within 30 days) whether your request is approved, denied, or if additional information is needed.

8.    Collection Information Statement—You may still qualify for an installment agreement if you owe more than $25,000, but you are required to complete a Form 433F - Collection Information Statement before the IRS will consider an installment agreement.

9.    User Fees—If an installment agreement is approved, a one-time user fee will be charged. The user fee for a new agreement is $105 or $52 for agreements where payments are deducted directly from your bank account. For eligible individuals with lower incomes, the fee can be reduced to $43.

10.    Check Withholding—Taxpayers who have a balance due may want to consider changing their W-4 - Employee’s Withholding Allowance Certificate with their employer. A withholding calculator at www.irs.gov can help taxpayers determine the amount that should be withheld.

For more information about the Fresh Start initiative visit www.irs.gov.

   

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