What to do if YOU Owe Money to the IRS

Most taxpayers overpay their taxes and get a refund from the Internal
Revenue Service when they file their tax returns. For those who don’t
get a refund, there are several options to pay their tax bill.*
Tax bill payments:* If you get a bill from the IRS this summer that
shows you owe late taxes, you are expected to promptly pay the tax owed
including any penalties and interest. If you are unable to pay the
amount due, it may be better for you to get a loan to pay the bill in
full rather than to make installment payments to the IRS. That’s because
the interest rate and penalties the IRS must charge by law are often
higher than what lending institutions may be offering.*
Electronic Funds Transfer: * You can pay your tax bill by electronic
funds transfer, check, money order, cashier’s check or cash.*
Credit card payments:* You can pay your bill with a credit card. Again,
the interest rate on a credit card may be lower than the combination of
interest and penalties the IRS must charge.*
Additional time to pay:* Based on your circumstances, you may be granted
a short additional time to pay your tax in full. There generally is no
set up fee for a short-term agreement.*
Installment Agreement:* You may request an installment agreement if you
cannot pay the total tax you owe in full. This is an agreement between
you and the IRS to pay the amount due in monthly installment payments.
You must first file all required returns and be current with estimated
tax payments.*
User fees: * If an installment agreement is approved, a one-time user
fee will be charged. The user fee for a new agreement is $105 or $52 for
agreements where payments are deducted directly from your bank account.
For eligible individuals with lower incomes, the fee can be reduced to $43.*
Offer in Compromise: * IRS is now offering more flexible terms with its
Offer-in-Compromise (OIC) Program. An OIC is an agreement between a
taxpayer and the IRS that settles the taxpayer’s tax debt for less than
the full amount owed. An OIC is generally accepted only if the IRS
believes, after assessing the taxpayer’s financial situation, that the
tax debt can’t be paid in full as a lump sum or through a payment
agreement.*
Check withholding: * Taxpayers who have a balance due may want to
consider changing their Form W-4, Employee’s Withholding Allowance
Certificate, with their employer.*
Fresh Start: * The IRS has a program to help struggling taxpayers get a
fresh start. Through the Fresh Start program, individuals and small
businesses may be able to pay the taxes they owe without facing
additional or unnecessary burden.