You owe the IRS money. If it’s a small enough amount, then you just pay it. What are your options when it’s a large amount?
The IRS will work with you and you have eight options available to you.
Change your payroll check withholding. While this may not help you this year, it would help you from potentially owing taxes in future years. File a revised W-4 with your employer and have them withhold more in taxes by either lowering your number of dependents or having them withhold an additional dollar amount.
The IRS takes debit/credit card payments. There may be an additional fee for the transaction through a third party but it may be a cheaper fee than the one that you pay to set up a payment plan with the IRS.
Payment plans are another way to go. Otherwise known as an installment agreement. You can set up an agreement with the IRS to pay monthly. You can also set up a direct debit so that the payment comes out of your account on the same date every month and you’ll never miss a payment that way. The fees for this type of plan is $105. An additional fee of $52 is for the direct debit agreement. If your income is below a certain level though, they will only charge $43.
Maybe you are getting a loan or think you can come up with the money soon? Then ask for a short term agreement. This means that you can pay the full amount in 120 days or less.
There’s the tax bill payments option too. Here you receive a bill from the IRS. Pay it as soon as possible as interest and penalties accrue every month. If you can’t pay it all, a loan may be the best option as their interest may be less than the interest and penalties that you get from the IRS.
Have you heard about electronic funds transfer? This is a great way to pay your tax bill by phone or you can set up an account through the EFTPS website.
The IRS has a program called Fresh Start. If you are really struggling to pay your taxes, you should look into this program. Their objective is to make it easier for you to pay back taxes and avoid tax liens.
Last, but not least, is an offer in compromise. This program allows you to pay less than the full amount you owe. If the IRS agrees to your offer, then be prepared to pay the new and agreed upon amount in full as payment plans are not an option. This one is the most time consuming process. Even if everything is filled out perfectly, it can still take the IRS quite a long time to respond to it. While you can do this yourself, you may be better off paying your accountant to do this for you. He will know what documentation you will need to support your application for the offer.