During June and July, the IRS sends out lots of bills. The notices – CP 14 and CP 501 – will notify you of any remaining balance due on your 2017 taxes.
There are four ways to make a payment and four ways to request more time that we will cover in the post. Remember: Never send cash through the mail and never pay by retail store gift card or money transfer over the phone (generally anyone who calls regarding back taxes is a scam artist).
Acceptable forms of payment
The IRS offers lots of ways for you to pay your tax balance. You can use the free Direct Pay to have a debit taken out of a checking or savings account. The Electronic Federal Tax Payment System accepts payments by phone or online. A credit card payment is also fine.
And unlike Starbucks and some other retailers, the Service still accepts a personal check or money order made payable to the IRS.
What options exist if none of these work for you, because you do not have the money to pay a significant tax bill?
Payment agreements, installments, delayed collection and Offers in Compromise
The Service wants to get paid, but it will work with you. If you owe less than $50,000 and have filed past tax return, an online payment agreement may give you the time you need to pay your bill. The next option is an installment agreement that deducts a certain amount from your bank account each month.
When your financial circumstances have changed and there is no way you can pay until something changes, requesting delay in collection could help. A loss after a fire or serious illness might be situations when the IRS would give you time to get back on your feet before restarting collection efforts.
Offers in Compromise allow taxpayers who are struggling to settle their back taxes for less than the full amount owed. These are not easily granted and must be handled carefully.
If you owed a significant amount in 2017, summer is now the time do an income/tax analysis. In another post, we will discuss a tool that can prevent tax problems from recurring.