If you filed a return on April 17 (or the 18th thanks to the Internal Revenue Service's Tax Day systems glitch), but didn't pay your full tax bill, Uncle Sam is coming for you.
OK, not in person (yet). So you can still answer when someone rings your doorbell.
But the IRS says in the coming weeks it will be sending out billing notices to 2017 tax return filers who still owe money.
These tax bills actually will be in the form of IRS notices, specially notices CP14 and CP501, which are frequently mailed in the months of June and July.
Both of these documents, which will show up in snail mail boxes, notify taxpayers that they have a balance due.
Notice next steps: Getting any correspondence from the IRS is unsettling.
Getting a notice from the IRS that you owe money can be downright scary.
But don't panic.
When you get any IRS notice, first and foremost read it. Don't just stuff it in a drawer and ignore. It won't go away. And avoidance will only make matters worse.
If you have a tax pro who helps you, contact that person immediately. They are experienced in dealing with IRS, shall we say, taxpayer outreach.
Regardless of whether you're dealing with the notice on your own or with the help of a tax professional, you/y'all need to:
- Read your notice carefully. It will explain what steps you need to take next. In the case of payment due notices, it will tell you how much the IRS believes you owe and how to pay it.
- Pay that amount by the date indicated in the notice.
- Make a payment plan if you can't pay the full amount you owe.
- If you disagree with the IRS bill and/or amount it says it due, you or your tax pro should contact the IRS to discuss the discrepancies.
Ways to pay due tax: If you agree that the IRS is correct and you owe the U.S. Treasury some more money, you have several payment options.
Direct Pay lets you pay your tax bill directly from a checking or savings account. This service is free.
The Electronic Federal Tax Payment System (EFTPS) lets you pay by phone or online. EFTPS is a free service from the Treasury Department, but you must enroll in EFTPS before you can use it. That process takes at least a week.
Debit or credit card tax payments are gladly accepted by the IRS. This is fast and easy. Note, though, that the credit or debit card companies will charge you a processing fee for sending your payment to the IRS. Plus, a credit card tax payment will increase that account's unpaid balance that's subject to, in some cases, very high credit card interest rates.
Old-school taxpayers can send the IRS a check or money order made payable to the United States Treasury (or U.S. Treasury).
For folks who think cash is king, the IRS does accept cash tax payments but not through the mail. Instead, you can bring your Benjamins (or other dollar denominations) to some IRS offices. There is a fee to pay by cash ($3.99 per payment), since the method is handled by an outside vendor. And there are some preparatory steps you must take. But if there's not an official IRS branch near you where you can hand over your cash tax payment, check for a participating PayNearMe location.
Payment plans, too: If you simply can't pay what you own in full by one of the options above, look into a payment plan.
The IRS offers several pay-over-time options, including:
- Online Payment Agreement — Individuals who owe $50,000 or less in combined income tax, penalties and interest and businesses that owe $25,000 or less in payroll tax and have filed all tax returns may qualify for an Online Payment Agreement. This payment usually can be set up in a matter of minutes by submitting an online application.
- Installment Agreement — Installment agreements paid by direct deposit from a bank account or via payroll deduction are another option to help taxpayers avoid defaulting on payment plans, not to mention savings on time and snail mailing costs. Taxpayers who don't qualify for a payment agreement may still pay by installment.
Talk to the tax man: The key in any situation where you can't pay your taxes is to talk with the IRS about your payment problems. You might be surprised at how empathetic Uncle Sam's tax collector can be.
If the IRS determines that you're unable to pay, it may delay collection until your financial condition improves.
The IRS also might accept an offer in compromise (OIC) from you. Here, qualifying taxpayers who are struggling to pay their tax bills can settle with the IRS for less than the amount they owe.
If you think this might apply to you, go to the IRS' online Offer in Compromise Pre-Qualifier tool.
Pay soon or owe more: Regardless of how you settle up with the IRS, do so quickly. The longer you put off paying, the more interest and penalty charges accrue.
And even if a taxpayer works out a payment solution, the IRS cautions that it might still file a Notice of Federal Tax Lien to secure the federal government's interest in your bill.
Federal law requires the lien to establish priority as a creditor in competition with other creditors in certain situations, such as bankruptcy proceedings or sales of real estate.
And liens don't just affect your tax life. The attachment may appear on your credit report, causing you credit rating problems.
So resolve your tax bill as quickly as possible in the way that works best for you.
You also might find these items of interest:
- How to e-file and, if necessary, e-pay your taxes
- Some fees to set up IRS tax payment plans have more than doubled
- IRS selects 4 private collection agencies to go after overdue tax debts
Cash Balance Plans
I usually tell clients that they have a couple months before the IRS starts getting testy. But there are a lot of options to pay including credit cards and an installment agreement. Everybody wants to do an offer in compromise but that will not work for the vast majority of taxpayers. Sometimes you just have to such it up and write the check.