Ways to pay off a big tax bill
November 4, 2009 · Tagged with Taxes
Get more time
In some situations, you might qualify for more time to pay, as long as you can convince the IRS that the delay will help you ultimately fulfill your tax obligation.
If you qualify, you’ll get between 30 days to 120 days to pay your due tax. You’ll also generally pay less in penalties and interest than you would if you paid your taxes via an installment agreement.
Request a short-term extension of time to pay by filing an Online Payment Agreement application or by calling 1-800-829-1040.
Make a tax deal
In some cases, the IRS might be willing to accept an offer in compromise, or an OIC. This is a lump-sum payment you offer to make that is less than the total amount of tax you owe.
The IRS sometimes agrees to smaller payments so that it will get at least some tax payments more quickly and without years of costly collection efforts.
An OIC is not simply a haggling technique to reduce your bill. The key to a successful offer is to propose an amount that reasonably reflects your ability to pay. To discourage taxpayers from making an offer just to stall payment, you must include a $150 application fee with the OIC request. If your offer is accepted, the fee will go toward your new payment amount.
The IRS reviews an applicant’s financial situation and future income potential to determine whether an offer is appropriate. In most cases, the decision is no. The IRS says that since the OIC program was designed for taxpayers in extreme financial duress, few individuals qualify under terms they would like.
If, however, you believe your situation would meet the requirements, you can get detailed information in IRS booklet Offer in Compromise, Form 656.
Whichever tax payment method you choose, don’t delay. Putting off your filing and payment of taxes will only compound your financial and tax problems.