Tax Day has officially come and gone, so it’s likely sent many procrastinating taxpayers in a panic. And if you’re like me and you owe more than you were anticipating, you might be wondering what the heck to do next. Is the IRS going to come knocking if you can’t immediately pay off your tax bill?
In a word, no. The IRS, whatever names we might call them when we’re feeling angry, has fairly flexible payment options. So don’t fret. Here are a few tips for paying off that larger-than-life bill and avoiding unnecessary stress.*
1. Chat directly with the professionals
Did you know the IRS, like TSheets, has a chat option? I didn’t. You can chat directly with an IRS rep who can give you some advice about how to pay, whether that’s through a short-term payment plan, long-term payment plan, or something else.
Simply go to the IRS website and click on the “chat now” button or wait for the chat feature to pop up on your screen. After you’ve had your questions answered, 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 a couple of different payment plans, both for individuals and businesses. Short-term payment plans cost nothing to set up, while long-term payment plans have a $31 fee. Both plans require the taxpayer to pay interest on the amount they owe.
The website doesn’t 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% annually or .5% each month. Folks on an active installment plan will pay just a .25% interest rate each month.
That said, there is another option you won’t 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’s 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 repeat the process. Pay what you can, get a new bill. Pay what you can, get a new bill.
If the balance isn’t paid in full by August, the IRS will send a somewhat more threatening-looking CP504 notice. If you receive one, you’ll want to get ahold of the IRS immediately to determine how you should move forward and perhaps get on a more structured payment plan.
Of course, being a taxpayer myself and not a tax expert, my best advice is to use that handy-dandy chat feature and ask an IRS rep yourself. Your situation might require a different path forward than any of the tips above suggest.
The main point here is to relax. Tax time can be rough, but often, the way out of trouble isn’t as daunting as it first appears, and the IRS can help.
*This material has been prepared for informational purposes only and was accurate at the time of publication. It is not intended to provide and should not be relied on for tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.