If you did your taxes this year only to find out that you owe money, don’t panic—this is a very common situation. Although it can be intimidating to owe a large chunk of money, the IRS is more than happy to make tax payment arrangements for Union City, NJ taxpayers. There are four options to pay what you owe—read on to find out which choice is the best for your situation.
Short-term payment plan
If you owe less than $100,000 in taxes, penalties and interest, you can apply for a short-term payment plan online. This is best for people who can’t pay their taxes due to temporary factors. You’ll have 180 days to pay the full amount. However, you’ll still be subject to interest and penalties on the full amount until it’s paid off.
Form 1127 is another option. This is the application for an extension to pay the money, based on undue hardship. Keep in mind that for either option, you’ll still need to file your taxes on time.
Long-term payment plan
The IRS also offers a long-term payment plan, which allows you to pay off your tax debt in installments over the next six years. Keep in mind that you’ll be charged a setup fee as well as penalties and interest, but the failure to pay rate goes down to 0.25 percent from 0.5 percent.
When setting up your payment plan, you’ll have a few payment options: direct debit from your bank, payroll deduction from work, checks or money orders by mail, credit card payments via phone or internet, payment by Electronic Federal Tax Payment System (EFTPS) or an Online Payment Agreement (OPA). Typically, direct debit is the way to go: that only comes with a $31 fee, whereas non-direct debit could be as much as $149.
Make sure you set a monthly installment you can afford to pay, so you don’t risk defaulting on the agreement.
Offer in compromise
This is a solution where you offer to pay a reduced amount of money to fulfill your entire obligation. It usually only applies to permanent factors, like job loss or business failure, and costs $205 to set up—unless you meet the low income certification guidelines. In that case, you will not have to pay to set up the OIC plan.
Temporary collection delay
Finally, you can request a collection delay if there’s no way you’ll be able to pay your tax bill in the foreseeable future. The IRS will evaluate your case and decide whether your debt is “currently not collectable.” If they agree, your account will be put on hold until your finances improve—then the IRS will collect your payments. You’ll still be responsible for the full amount.
If you have questions about paying your tax bill in Union City, NJ, call Kedean’s Generation today to set up a consultation and discuss your situation. We can assist you in getting through the process and help ensure your future tax bills will be more manageable.
Categorised in: Tax Consultant