You may be one of the many taxpayers who realize that they owe more in taxes than they have available right now. If that’s the case, here are some tips that will help you keep your penalties and interest to a minimum.
1. Even if you can’t pay everything you owe right now, go ahead and file your return on time and pay as much as you can with the return. These steps will eliminate the late filing penalty, reduce the late payment penalty and cut down on interest charges. You may mail a check payable to the United States Treasury or check out the electronic and credit card options for paying. IRS.gov.
2. You may want to consider obtaining a loan or even paying by credit card. The interest and penalties that are imposed by the IRS may actually be lower than the interest rate and fees charged by a bank or credit card company.
3. Ask for an installment payment agreement. You do not need to wait for the IRS to send you a bill before requesting a payment agreement. Options for requesting an agreement include:
• Using the Online Payment Agreement application and
• Completing and submitting IRS Form 9465-FS, Installment Agreement Request, with your return. The IRS does charge a user fee to set up your payment agreement. See www.irs.gov or the installment agreement request form for fee amounts.
4. As part of the IRS Fresh Start Initiative for tax year 2011, qualifying individuals may request an extension of time to pay and have the late payment penalty waived. To see if you qualify visit www.irs.gov and get form 1127-A, Application for Extension of Time for Payment. But hurry, your application must be filed by April 17, 2012.
5. If you receive a bill from the IRS, please contact them right away to discuss payment options. The worst thing you can do is simply ignore the bill.
If you can’t pay in full and on time, the key to minimizing your penalty and interest charges is to pay as much as possible by the tax deadline and the balance as soon as you can.