I hear taxpayers say that they owe, and because of the economy they are not going to file this year. Well, let me make it simple for you- just file! If you fail to file, you will face a penalty and interest at 5% per month capped at 25% by October 15th. So, can you really afford to tack on another 25% to your debt?
Liberty Tax® encourages unemployed and financially-challenged taxpayers who owe this year and are worried about their ability to pay to examine enhanced options offered by the IRS. The IRS has expanded the 'offer in compromise' program that allows a settlement of the taxpayer’s tax liability for less than the full amount owed based on the individual’s current financial situation, income and future earning potential. Previously, the IRS determined the amount of the offer in compromise on the taxpayer’s earnings in prior years. Other options include paying the tax debt with a loan or credit card, or agreeing to pay through installments.
The IRS has pledged to work with struggling taxpayers who make the effort to try and pay taxes. It’s always advisable to pay what you can, and file on time or request an extension. An extension of time to file a tax return still does not constitute an extension of time to pay any tax liability. Many misunderstand this point, so let me make it simple, an extension to file is not an extension to pay and interest will start. Penalties and interest accrue from April 15 if the tax liability has not been paid.
The IRS will grant an automatic six-month filing extension to taxpayers who file a timely extension request. Taxpayers do not need to provide a reason for their request. Individual taxpayers need to file Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, by April 15 to be granted a filing extension until October 15.
Taxpayers can request permission to make monthly installment payments by filing an installment agreement form with their tax return. If you are not currently on an IRS installment plan, complete Form 9465, Installment Agreement Request, and attach it to your return. To limit penalty and interest charges, the taxpayer should pay as much of the tax due as possible when sending in your return.
Taxpayers who have already mailed or electronically filed their returns can apply for an installment request. An application for an installment agreement can be made online. Come into our office and we can assist you in completing the application.
If the request is approved, the IRS will charge a fee of $105, unless direct debit is used ($52) or there is a reduced fee for individuals with lower incomes ($43). These payments must be made on time, and the taxpayer must agree to meet all future tax liabilities. One available option to ensure timely payments is to have the funds directly debited from a bank account.
Taxpayers can charge their taxes owed to a MasterCard, VISA, Discover, American Express Card or a debit card. They can also pay on the internet by going to www.PAY1040.com or www.officialpayments.com, or call 1-888-PAY1040 (1-888-729-1040) or 1-800-2PAY-TAX (1-800-272-9829). A convenience fee applies.
Hopefully, that makes owing a little simpler, although not less painful.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.