ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

How to Pay Taxes

Updated on April 12, 2011
KeithTax profile image

Keith Schroeder writes The Wealthy Accountant blog with 30 years experience in the tax field. He is the tax adviser of Mr. Money Mustache.

The verdict is in and it isn’t good. After digging up every deduction allowed on Earth you owe the government some money. When a balance due shows up on a tax return, the first question is: How do I pay my taxes?

There are several options available. The government makes it easy for you to pay your taxes. We will review extensions, paying taxes with credit card, installment agreements, abatement, and Offers in Compromise. Your personal situation will determine which avenue to take. The worst courses of action are to not file the tax return (illegal and could lead to jail) or file the tax return and ignore the tax liability. The IRS will become more aggressive in their collection efforts as time goes by. They will garnish paychecks, levy bank accounts, and slap a lien against your home. How you pay your taxes is up to you, but if you allow the problem to fester it will be an unpleasant choice. Use this guide to chart the optimum course for you.

Simple Payment Methods

Most tax programs offer the opportunity to pay your taxes electronically from within the program. Once a tax liability is determined, you can enter bank account information right inside the tax software. The IRS will automatically withdraw the money on the due date. This is the simplest way to pay your taxes.

You can send a check to the IRS using Form 1040-V. The envelope must be postmarked by the due date.

Credit Card

You can pay your taxes with your credit card for a fee. The fee is in addition to your taxes owed and normally run around 2-2.5%. Your credit card may also assess a fee and interest. Any miles or cash back from the credit card company will be overshadowed by the upfront fee.

You can research companies offering credit card tax payment programs from the search engines. Most tax and financial professional agree this is the worst of all options to pay your taxes.

Installment Agreements

You can apply for an installment plan by filing Form 9465, calling the number on the IRS bill, and online at the IRS website if you owe $25,000 or less in taxes. You can include Form 9465 with the original tax return for paper and e-filed returns. Interest and penalties will continue to accrue. The installment agreement must offer to pay the tax in full in 60 months or less. You can also request a payroll deduction with Form 2159. A one-time user fee of $105 will be charged by the IRS, $52 for direct debit from a bank account.

For tax liabilities over $25,000 or payments extending beyond three years, you may need to file Form 433-F, Collection Information Statement. Your payment request will need to include all disposable income over necessary living expenses. The IRS can revoke an installment agreement if you fail to make a payment, file a tax return by the due date, plus extensions, if they discover you misrepresented or provided inaccurate information during the negotiation process, or if your financial situations gets significantly worse or better.

Abatement

For many people, the taxes are manageable; it is the penalties that kill you. File Form 843 to request an abatement of penalties. Be honest when filling out the form. Provide the reason for not paying your taxes on time. Say it in three sentences or LESS. Take it from someone that has filed thousands of abatements. The biggest drawback is that the tax and penalty must be paid before the request for abatement can be made.

Offers in Compromise

The TV ads claiming you can settle for pennies on the dollar with the IRS are speaking of Offers in Compromise. Under a third of all offers are accepted by the IRS and are time consuming and expensive. The TV ads exist because the accounting fees to file run into the thousands. An Offer in Compromise is a last line of defense, not a first line.

If your tax liability is beyond a level you will ever get paid, you are a candidate for an Offer in Compromise. The offer must include two years disposable income plus 80% of assets minus loans.

Conclusion

A well thought out plan can reduce IRS tax stress. Bookmark or link this article for future reference. Comment below further ideas for other to consider.

Comments

Submit a Comment

No comments yet.

working

This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

Show Details
Necessary
HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
LoginThis is necessary to sign in to the HubPages Service.
Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
AkismetThis is used to detect comment spam. (Privacy Policy)
HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
Features
Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
MavenThis supports the Maven widget and search functionality. (Privacy Policy)
Marketing
Google AdSenseThis is an ad network. (Privacy Policy)
Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
Index ExchangeThis is an ad network. (Privacy Policy)
SovrnThis is an ad network. (Privacy Policy)
Facebook AdsThis is an ad network. (Privacy Policy)
Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
AppNexusThis is an ad network. (Privacy Policy)
OpenxThis is an ad network. (Privacy Policy)
Rubicon ProjectThis is an ad network. (Privacy Policy)
TripleLiftThis is an ad network. (Privacy Policy)
Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
Statistics
Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)