Tax Day has officially come and gone, so it is likely sent a lot of procrastinating taxpayers in a panic. And if you are like me and you owe more than you were expecting, you might be questioning what the heck to do now. Is the IRS going to come saying if you cannot immediately pay off your tax bill?
To put it simply, no. The IRS, whatever names we might give them when we are feeling angry; has moderately flexible payment choices. So do not fret. Here are some tips for paying off that larger-than-life bill and avoiding unnecessary stress.*
1. Chat directly with the professionals
Did you know the IRS, has a chat option? I did not. You can chat directly with an IRS rep who can provide you with some advice about how to pay, whether that is through a short-term payment plan; a long-term payment plan, or something else.
Simply go to the IRS site and click the “chat now” button or wait for the chat feature to pop-up on your screen. After you have had your questions responded; you can save the full transcript or print it out to refer back to later.
2. Enroll in an IRS payment plan
The IRS has various payment plans; both for people and businesses. Short-term payment plans cost nothing to set up, while long-term payment modes have a $31 fee. Both plans need the taxpayer to pay interest on the amount they owe.
The site does not clearly define the interest rate, but when I asked via that convenient IRS chat feature; the IRS rep said the interest rate for a short-term plan is 6% yearly or .5% each month.
Folks on an active installment plan will give just a .25% interest rate each month.
That being said, there’s another option you will not find on the website, but it does exist.
3. Pay what you can now—whatever that looks like
If you owe $3,000 but can only pay $500 right now; that is ok. Pay that $500. The IRS will send you a new bill in about a month for the remainder; plus 1% interest. So if $2,500 is your tax remainder; the next bill will be about $2,525.
From there, you can then repeat the process. Pay what you can; get a new bill. Pay what you can, get a new bill.
If the balance is not paid in full by August; the IRS will send a somewhat more threatening-looking CP504 notice. If you receive one, you will want to get ahold of the IRS immediately to ascertain how you should move forward and possibly get on a more structured payment plan.
Of course, as a taxpayer myself and not a tax expert; my best advice is to use this handy-dandy chat feature and ask an IRS rep yourself. Your job might require a different path forward than any of the tips above suggest.
The main point here is to recline. Tax time can be rough; but often, the way out of trouble is not as daunting as it first appears; the IRS can help.