IRS offers an agreement to pay taxes known as Installment Payment Agreement. It is a normal way to payment monthly to get the old amounts owed to IRS paid over a period of time.
The agreement is fairly easy to set up in most cases. You just contact IRS by mail, or online or just over the telephone. There are some other requirements including you must file all future returns on time (including the extension of time to file form 4868) and you must not only pay taxes on time in the future, but you may be required to pay estimated tax quarterly payments in the future.
The goal is to “when you are in a hole, stop digging” — don’t make the problem bigger than it is.
IRS has three different rates to do an Installment Payment Agreement. If you agree to have the monthly payment paid by a direct debit (electronic transfer) from your bank account, the fee to start an agreement is reduced.
If you qualify as a low-income taxpayer (income at or below 250 percent of the poverty guidelines), the fee is reduced.
As of Jan. 1, 2017, if you contact them in person or by phone or mail, IRS will charge $225 to set up a regular Installment Agreement. If you contact IRS by phone or by mail and agree to have the monthly payment done by direct debit (withdrawal) from the bank account, the fee to establish the agreement is reduced to $107.
If you establish the agreement online and you agree to pay by check or direct debit, the fee to establish the agreement will be $149 as of Jan. 1, 2017.
The fee for agreeing to a direct debit from your bank account will be $31 as of Jan. 1, 2017.
If you had an agreement, but failed to pay as scheduled, it is possible to restructure or reinstate the agreement. That fee will be $89 as of Jan. 1, 2017.
If you qualify as a low income taxpayer, the fee would be $43, but if you agree to a monthly direct debit from your bank account the fee is reduced to $31.
You can see the fees to set up an Installment Payment Agreement are not big. If you owe back taxes to IRS, why not contact them and start the monthly payments to get it all behind you?
Did you hear? “The discipline you learn and the character you build from setting and achieving a goal can be more valuable than the achievement of the goal itself,” by Bo Bennett.
John Bullis is a certified public accountant, personal financial specialist and certified senior adviser who has served Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs.