5 Tips for People Who Owe Taxes
The majority of those who file taxes each year actually receive a refund from the IRS, essentially meaning that they have overpaid their taxes that year. But, if you happen to be in the minority and actually owe taxes to the IRS this year, take note of these important tips to help you navigate this process.
- Timing is Key: The most important thing to realize if you owe taxes to the IRS is how critical it is to pay on time. The longer you wait, the more you owe. It is that simple. The IRS can add hefty interest and penalties to the actual amount you owe, compounding an already stressful problem. Even if you request an extension to file, you must still pay an estimate of what you owe by the April 15th deadline. The bottom line…the sooner you pay, the better.
- Various Types of Payments Accepted: The IRS actually accepts many forms of payment. You can now set up a withdrawal from your bank account (electronic funds transfer) or you can pay by more traditional methods such as a check or money order. The IRS also accepts credit cards as payment for your tax debt. While this might not seem like the best option at first glance, often interest rates on your credit cards are lower than the interest and penalties that the IRS can impose if you are late making your payment.
- Installment Agreement: If you cannot make your payment to the IRS in one lump sum, you may want to look into the option of an installment agreement. This works very much like a credit card payment in that you make monthly payments to the IRS over time to pay your debt. You are still responsible for any interest and penalties but it is sometimes a necessary option for those who do not have credit cards and cannot make the payment at one time. There is an application process for an installment agreement and you are required to pay a $120 fee when you submit this application to the IRS.
- Extra Time: There are some (limited) cases in which you might be able to squeeze in a little more time before you pay. If you owe money and think that you need another few weeks to come up with it, you can pay what you can by April 15th. The IRS will send you a bill for the remainder of the balance, which will most likely take about 30 days. You will have to pay a little bit of interest, but if you pay when you get the balance notice, it will be minimal.
- Get Help If You Need It: One other piece of advice for those who owe taxes is to seek the help of a reputable tax professional to be sure that your calculations are correct. Very often a tax firm can find additional areas where you can deduct or other common areas that may save you some additional money. It is always a good idea to get an extra set of eyes to be sure you do not pay too much!
Success Tax Relief can help you resolve your tax debt and work with the IRS on your behalf. Give us a call at (877) 958-6638 and find relief today!