Taxation & Estate Planning

Six Ways to Pay Off Your IRS Debt

By Darrin Mish

If you have received a tax bill from Uncle Sam, here are six ways you can pay up.

1. Pay the bill in one lump sum, including any penalties or interests

If you are unable to pay in full at one go, consider taking a loan or using your credit card to pay off the amount. Paying all at once is always a better option than paying in installments, if you can help it. If you choose to pay by credit card, you need to contact either the Official Payments Corporation at 800-2PAYTAX (website www.officialpayments.com) or Link2Gov at 888-PAY-1040 (website www.pay1040.com). Check whether the interest rate on your bank loan or credit card is lower than the interest and penalties charged by the IRS.

2. Pay by electronic bank transfer, money order, check, cashier's check or cash

If you opt to pay by electronic bank transfer, you need to use the Electronic Federal Tax Payment System at www.eftps.gov or call 800-555-4477 or 800-945-8400.

3. Pay by installments if you cannot afford to pay your taxes in full

You need to obtain the IRS' consent. The primary condition for approval is that you must have filed all your returns and be current with estimated tax payments.

4. If your aggregate amount owing is less than $25,000, pay by installment using the IRS web-based Online Payment Agreement.

You can access the Online Payment Agreement at the IRS website, www.irs.gov.

5. Another way to pay by installments is to fill up IRS Form 9465 and mail it to the IRS using the envelope they provide if your total taxes amount to less than $25,000.

You should provide the IRS with a monthly repayment amount when you submit Form 9465. The minimum monthly installment you should suggest would be an amount that would pay off the entire debt by 60 months, otherwise you would have to fill up a Collection Information Statement Form 433.

6. If you owe more than $25,000 in total taxes, penalties and interests, you may also apply for installment payments using Collection Information Statement Form 433F

Once again, you are expected to suggest a monthly installment amount. Propose as high an amount as you can because the IRS will base their approval on the amount that you set.

In the event that your installment payment plan is approved, you need to pay a one-time fee of $105. But this amount is reduced to $52 if your monthly installments are deducted directly from your bank account balance. If you are of a certain income bracket and below, the fee can be further reduced to $43.

For more information, visit the IRS website at www.irs.gov or call 800-TAX-FORM (800-829-3676).

Darrin T. Mish is a veteran, nationally recognized tax attorney who has focused on providing IRS help to taxpayers for almost two decades. He regularly travels the country training other attorneys, CPAs and enrolled agents on how to handle their toughest cases with the IRS. He is highly ranked among the top attorneys in the country, with an AV rating from Martindale-Hubbell and a perfect 10 on Avvo.com. Martindale-Hubbell has also honored him with a listing in their Bar Register of Preeminent Lawyers. He is a member of the American Society of IRS Problem Solvers and the Tax Freedom Institute. With clients on every continent but Antarctica, he has what it takes to solve your IRS problems no matter where you live in the world. If you would like more information about his practice and how he can help you, please call his office at (813) 229-7100 or toll free at 1-888-GET-MISH.

Full post as published by IRS Problem Solver Blog on September 30, 2009 (boomark / email).