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Need more time to pay the IRS? Four tips to settle your bill

Need more time to pay the IRS? Four tips to settle your bill
Ines Zemelman, EA
01 April 2017

All taxpayers should file their tax return on time, even if they can’t pay what they owe. Filing on the extended due date is also counted as filing on time - provided that extension request was filed by the original due date of the return.

Most importantly - if you cannot file on time, file an extension to save you from potentially paying a failure to file penalty - this is the most onerous of penalties.

Even if an extension is filed then comes the all encompassing question - when is the payment of tax bill due? Does it get extended if you have filing due date properly extended? The answer is NO. For the most individuals tax payment is due by the original due date of the return regardless of the extension.

If you filed your tax return on time, you already made the most important step - declared your income. Now the IRS knows that you are aware of your tax bill.

Payment of the entire tax bill may be challenging, especially if you did not expect that bill this year would be higher than in previous years.

Four tips for those who can’t pay their taxes in full by the April 18 due date:

1. File on time and pay as much as possible. Pay online, by phone, with your mobile device using the IRS2Go app, or by check or money order. IRS accepts a broad range of electronic payment options.

2. Do not take money out of your retirement account to pay the tax bill. This will only make your tax situation worse. The following year you will owe tax and penalty on income taken from the retirement account, and your tax debts will pile up. Any of the conventional methods listed above will cost you less than using your pre-tax earnings taxable upon withdrawal.  This may be the most important tip of the 4 in that this carries the most consequences going forward. Contact us if you have any questions.

3. Use the Online Payment Agreement tool.  Don’t wait for the IRS to send a bill before seeking a payment plan or installment agreement. The best way is to use the Online Payment Agreement tool on the IRS website. Taxpayers can also file Form 9465, Installment Agreement Request, with their tax return. Set up a direct debit agreement. With this type of  payment plan, there is no need to send a check each month.

4. Work with the IRS - do not ignore your bill. If ignored, the IRS may take collection action. Contact the IRS right away by calling the phone number on your bill to talk about options. The IRS will work with taxpayers suffering financial hardship

Remember to file on time. Pay as much as possible by April 18, 2017, and pay the rest as soon as possible to reduce the interest and penalties. If you receive a letter from the IRS while you still have an unpaid bill - find out how to handle it here.

Ines Zemelman, EA
founder of Taxes for Expats