The following article is provided courtesy of CCH, Inc.
The IRS has enumerated the various payment options and the installment payment program that are available to those taxpayers who cannot make full payment on their tax obligations. Checks or money orders should be made payable to "United States Treasury" and should include a social security number, a daytime phone number and the year and type of tax form being filed. If available, the Form 1040-V payment voucher should be submitted with the payment and should not be stapled to the tax return.
Taxpayers who e-file their returns via computer or telephone can authorize the Treasury Department to automatically withdraw their tax payments from their checking or savings accounts on a specified date. There is no charge for this service, and over 100,000 e-filers have authorized automatic withdrawals this year.
Automatic payment withdrawals may be authorized when requesting an extension by phone by calling 1-888-796-1074. Form 4868 should be used as a worksheet to prepare for the call, but it should not be mailed to the IRS. The adjusted gross income and the amount of taxes owed on the 1999 tax return are needed to authorize the withdrawal; however, taxpayers who are not requesting an extension will not need the prior tax year's information.
Taxpayers can charge their federal income taxes on major credit cards by contacting one of the two companies authorized by the IRS to process such payments. Both companies will accept charges by phone or through a Web site. Although the IRS does not charge a fee for credit card payments, the processors charge a convenience fee. PhoneCharge, Inc. may be reached at 1- 888-ALLTAXX or at www.About1888ALLTAXX.com. Official Payments Corporation can be reached at 1-800-2PAY-TAX or at www.officialpayments.com.
The IRS offers a streamlined approval process for taxpayers who qualify for an installment payment plan. If the amount due is not more than $25,000 and the taxpayer agrees to pay off the obligation within a five-year period, a collection manager's approval is not required and no liens have to be filed. To request the installment payment plan, taxpayers should attach Form 9465, Installment Agreement Request, to the front of their tax return and list the proposed monthly payment amount and date. The installment payment plan also offers the convenience of a monthly, automatic bank account withdrawal program.
A $43 fee is charged to set up the installment payment agreement. Taxpayers are also required to pay interest, currently figured at 8% per year, compounded daily, and a late payment penalty. The penalty is usually 0.5% per month of the balance due per month; however it drops to 0.25% when the IRS approves the installment agreement provided that the payer timely filed the return and did not receive a levy notice.
Taxpayers interested in determining their eligibility for an installment agreement can utilize an interactive feature on the IRS's Web site and can also download related forms at www.irs.gov. The forms can be requested by calling 1-800-TAX-FORM or by a fax to 703-368-9694 that requests item #14842 by return fax.