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Having to pay your tax bill might feel a bit like running into an unexpected roadblock - the all-too-familiar "not another bill" situation! Picture getting ready for the day, only to be met with the frustration of a non-starting car. If tax obligations are an issue for you, there are several options on the table.
How to Pay Your Tax Bill - 4 Alternatives
Short Term Payment Plan
File your return and request an extension of up to 180 days to settle the payment. While there are no fees for this short-term plan, do keep in mind that interest and penalties will apply until the full amount is cleared. The online application is a breeze, particularly if your total owed is below $100,000.
Long Term Installment Agreement
For a more extended approach, consider a long-term installment agreement. If your combined tax, penalties, and interest are $50,000 or less, and you've filed all required returns, you can apply for consideration. The setup incurs a fee, and interest persists until the debt is fully paid. However, opting for an installment agreement reduces the failure-to-pay rate and offers flexible payment methods, from direct debit to credit card payments.
Offer In Compromise (OIC)
If your financial struggles are rooted in permanent factors like a job loss or business failure, an OIC might be the solution. This agreement involves negotiating with the IRS to pay a reduced amount of your taxes, accepted as full payment. Ensure all filing and payment requirements are current to be eligible. Keep in mind that a $205 application fee applies, with exceptions for those meeting Low-Income Certification guidelines.
Temporarily Delay the Collection Process
When facing a prolonged inability to pay your full tax liability, a "currently not collectible" status may be the lifeline you need. This doesn't erase the debt but signals that, for now, you can't afford to pay. Completing a Collection Information Statement and providing proof of your financial status may be required before the IRS grants a temporary delay in collection.
Whether opting for a short-term fix or a more extended agreement, initiating the process promptly is crucial. Don't hesitate to engage with the IRS, keeping them informed of your situation. Your journey to financial ease begins with the proactive exploration of these options.