While many commercials are running about getting a big tax refund, not everyone is happy about filing. Depending on your situation, you may be stressing out because you didn’t pay enough taxes this past year and now owe Uncle Sam.
If you need help paying your taxes because you don’t have the money now to pay the total due, there are several options available, including filing for a tax extension and working out a payment plan with the IRS.
Option No. 1: Request a Tax Extension – Form 4968
Looking ahead at your 2014 taxes, if you know that you will owe the IRS, consider filing an extension (Tax Extension Form 4968) so you can have more time to come up with the money. You are still responsible for the money, so please know that you’ll be incurring penalties until you pay what you owe.
If you’re looking to raise money for your tax bill, I have some tips on how to trim your budget.
Option No. 2: Offer a Smaller Amount — Form 656
I was surprised to learn that you can request that the IRS accept a smaller amount as payment. It’s called an “offer in compromise.” Of course, be prepared to fill out a form (Form 656) and take care to explain in detail why paying the full amount would be an extreme financial hardship.
With an offer in compromise, you can submit a request to pay a small lump sum, or to send a few payments spread out over time. As with everything you send to the IRS, make sure your explanation for the smaller amount is reasonable and verifiable.
Check out our video on how to file taxes late:
Option No. 3: Set Up a Tax Payment Plan – Form 9465
What if you already received noticed from the IRS about the taxes you owe? Is there anything you can do? Believe it or not, the IRS will work with you by creating a payment plan that fits your budget.
Please be aware though of a few things:
- There are fees to set up your payment plan. Currently if you want to set up a plan where the IRS directly debits your bank account, it costs $52. A standard set up fee for a payment plan costs $105 (but if your income is very limited you may be able to get the reduced rate of $43).
- You need to call the number on your bill or notice and review what you need to complete for your specific case. Remember to write down everything, including the name of the agent you spoke with and when you called.
- Fill out the appropriate form (Form 9465-FS if you owe less than $50,000, Form 433-F if you owe more than $50,000) and submit all the information requested. You don’t want to incur more penalties by not getting the ball rolling.
Before you apply for a payment plan, double check that you’ve submitted all the proper tax forms and work out the numbers on what you can afford to pay. Just remember that any future refund you may qualify to receive will go toward your tax debt until it is completely paid off.
Paying Taxes on a Fixed Budget
I’d love to hear from you about your taxes. How many of you have had to deal with owing taxes? Were you able to pay the full amount when due or did you have to work out a deal? How did you do it? How did it go?