Tax Time and You're Short of Cash - What to Do?

Wondering how you're going to afford your tax bill this April? The financial writers at have put together a nice summary of tax payment alternatives.

Pay as Much as You Can in April

All taxes not paid by April 16 are subject to a penalty and interest. The fees can pile up quickly, so it's best to pay as much as you can up front.

Keep in mind the fact that the IRS is now taking credit cards, and your monthly fee on your credit card bill may be less onerous than the penalties and interest that the IRS will inflict. The IRS accepts MasterCard, Discover, and American Express. You must call one of two payment companies to arrange for a credit card payment of your taxes:

Official Payments Corp. (1-800-2PAY-TAX), or
PhoneCharge, Inc. (1-888-ALLTAXX)

Installment Plans

The IRS allows taxpayers who owe less than $25,000 the right to pay on an installment plan for up to five years. You can only pay on one installment plan, so if you are still paying on last year's taxes, you cannot apply for another installment plan.

To request an installment plan, attach form 9465, Installment Agreement Request, to the front of your tax return, and show how much tax you will agree to pay each month. There is a $43 charge for processing the installment agreement and initially there will be a .5% interest charge assessed each month on any unpaid balance. The interest rates drops to .25% per month once the installment agreement is approved.

Offer in Compromise

If you simply can't afford to pay your taxes, the IRS may be willing to accept an Offer in Compromise, which is an agreement to accept a lump sum payment that is less than the total amount of tax due.

It is recommended that you not approach the Offer in Compromise without the help of an experienced professional who can help you with the negotiation process. For more information, see the transcript from a recent AccountingWEB workshop on this program, or plan to attend our workshop on July 17 on the same topic.

You may like these other stories...

A new Gallup survey found that 58 percent of smokers in the United States see increased state and federal taxes on cigarettes as an act of unjust discrimination, while 39 percent believe the tax hikes are justified.The...
Liberal groups object to bill barring taxes on Internet accessThe Internet Tax Freedom Act hasn’t been a controversial bill. In fact, it’s so popular that senators are seeking to pair it up with a far more...
As complex as federal tax can get, at least you're only dealing with one agency: the IRS. But when you get into state and local sales tax, you're coordinating hundreds of jurisdictions that are constantly changing....

Upcoming CPE Webinars

Jul 23
We can’t deny a great divide exists between the expectations and workplace needs of Baby Boomers and Millennials. To create thriving organizational performance, we need to shift the way in which we groom future leaders.
Jul 24
In this presentation Excel expert David Ringstrom, CPA revisits the Excel feature you should be using, but probably aren't. The Table feature offers the ability to both boost the integrity of your spreadsheets, but reduce maintenance as well.
Jul 31
In this session Excel expert David Ringstrom helps beginners get up to speed in Microsoft Excel. However, even experienced Excel users will learn some new tricks, particularly when David discusses under-utilized aspects of Excel.
Aug 5
This webcast will focus on accounting and disclosure policies for various types of consolidations and business combinations.