Tax time is a bad time of year for a lot of people. The economy still hasn’t recovered and small business owners are struggling to stay afloat. As April 15th approaches, many tax payers are stressing out because they don’t know where they’ll get the money to pay the taxes owed.
If you find yourself owing money that you just don’t have in the bank, here are a few tips for making reasonable payments and working with the IRS to get your taxes paid.
1. Send the biggest amount you can with your tax return. If you can pay the rest within 120 days, just continue to send money on a regular basis. Add the tax year and your Social Security number to the checks.
2. If you can’t pay within that time period and owe less than $25,000 you can set up an installment agreement through Form 9465. The form is available online from irs.gov. There’s also a phone number and a drop down menu labeled “I need to set up a payment plan.” Your best bet for getting accepted is to propose a payment that you will send monthly and finish paying in 3 years or less.
3. Make sure you don’t propose a payment that will be hard for you to make; it’s much easier to add to the amount than take away from the amount. If you don’t make a monthly payment as agreed upon you will have to pay $45 to re-start the payment plan and possibly have your wages garnished or your bank account seized.
There are definitely some downsides to the installment agreements. There is a one time user fee of $105 for those paying by check. If you use a direct debit agreement you can knock that fee down to $52. If you are in the low-income bracket you can get the fee lowered to $43. After all that there is no guarantee that the IRS won’t file a Notice of Federal Tax Lien and ruin your credit score.
So if there’s any way you can borrow from the bank, your family, friends, or neighbor – do it! They will probably be much easier to work with on a payment plan.
