Love buying stuff? You’re not alone! We all love to shop, and I don’t care who you are: you have your weak spot too. Even the most frugal amongst us: try as we may, we still let loose once in a while and splurge. It’s human nature, after all.
Why People Pay Their Taxes Late: What Happened to Us?
But as a nation we have a problem with spending. We’ve let our obsession with purchasing things get out of hand. Our collective materialistic nature was over-indulged in the heyday of easy lending. Loose oversight on mortgages, home flipping, and easily-procured home equity loans meant lots of people were rolling in cash. What did they do with it? Spend spend spend!
We got used to buying stuff. Lots of stuff. But now the country has sobered up, lending rules are tighter, and debt is catching up to a lot of people. It’s harder to get a credit card, harder to get a loan, and bills keep mounting.
Don’t Be Late With Your Tax Bill!
So when it comes to your tax bill with the IRS, some people are in a jam. If you owe money to Uncle Sam after filing your Federal income tax return, what happens if you can’t pay your tax bill?
Well your credit score is affected for one. If you still care about getting future loans, buying a home with a mortgage, or getting credit cards then yes your credit score still does matter. It even affects what mortgage rate you’ll get when you’re finally ready to buy a home. Having a low credit score will cost you money in the long run.
For another, the IRS will charge you more money too. You’ll be assessed late fees and penalties for not paying your taxes or for paying your taxes late.
Get an IRS Payment Plan
So what’s a person to do? Get an IRS payment plan, that’s what. The IRS doesn’t necessarily want you to get into trouble with the credit reporting agencies and ruing your financial life. They want to work with you so they get their money and you come out unscathed. That’s why they have payment plans, also called installment plans.
There Are Two Types of IRS Payment Plans
There’s an IRS installment plan, which is essentially a loan from the IRS that can last as long as six years. Of course, you’ll be paying interest and fees but far less than if you don’t work out any IRS payment plan at all.
Then there’s a four month plan, or 120 days. You pay off your tax ill in that amount of time and of course since it’s a shorter time frame you get charged less interest and no fees.
Let’s take a look at both.
An IRS Installment Plan
If your IRS debt is less than $50,000 you can work out an IRS installment agreement with them. The Online Payment Agreement Application is available on the IRS website here. You’ll need your bank account information so you can set up automatic payments with the IRS.
Here are your options for paying on an IRS Payment Plan:
- This IRS payment agreement will cost you $52 to set up direct withdrawal from your bank account
- …or $105 to have it automatically taken from your paycheck
- If your income is low enough, the fee is reduced to $43. Use IRS Form 13844 Application For Reduced User Fee For Installment Agreements.
You can set up your IRS payment plan on your credit card, too.
You can apply for an IRS Payment plan by going online via the link above, by calling the IRS at the number on the bill you got from them, or by filling out the paper form, IRS Form 9465 Installment Agreement Request.
Get 120 Extra Days to Pay Your IRS Bill
If you think you just need some extra time to come up with the money for your tax bill, you can enter an IRS agreement plan for 120 extra days. That’s four months to get your money together. You aren’t charged any fees for this agreement but you still get penalties and interest.