You always endeavor to pay your taxes on time, but this year was different than usual. Though you put aside money for taxes in most cases, you had medical bills and other major purchases that required more of your savings than usual. That means that you simply don’t have what you need to pay your taxes in full.
If you’re not able to pay your taxes as a lump sum, one option you may have is to pursue an installment plan through the Internal Revenue Service. This plan is a wonderful option, because it allows you to pay back what you owe over time. With the help of your attorney, you may even be able to negotiate to pay back less than what the IRS says you owe.
How can you pay your taxes?
It is possible to pay your taxes to the IRS in different ways. You may opt for a full payment, short-term payment or long-term payment plan. The long-term payment plan, which takes over 120 days, is better known as the installment agreement.
You can qualify for these based on different scenarios. For example, you may set up a long-term payment plan in some cases. Usually, you can qualify for this if you owe $50,000 or less and have filed all the required returns. If you owe less than $100,000 in interest, penalties and taxes, then you may want to opt for the short-term plan.
Depending on the plan you choose, there could be fees associated with them. For example, a short-term payment plan is for 120 days or less, and there is no set-up fee. There are penalties and interest until the balance is paid in full to consider.
On the other hand, the long-term payment plan has a set-up fee of $31, and it also accrues interest and penalties. To pay each month without a direct deposit, the set-up fee increases to $149, as of February 2020.
If you are struggling to pay back what you owe to the IRS, it’s time to look into your options. Payment plans are an excellent way to pay what you owe, but only if you are capable of making those payments on time. If you’re going to struggle or believe that the debt is far too large, then your attorney can work with you to begin negotiating with the IRS to reduce what you owe.