It’s Important to Pay Taxes in Full

January 20th, 2009

As the April 15 deadline approaches, we begin to receive calls from taxpayers who do not have the ready cash needed to pay their tax liability. There are significant penalties for failing to pay your tax liability by the April 15 due date.

Whether paying with a timely filed tax return, or filing and paying late after receiving a bill from the IRS (and we have determined the bill is correct), taxpayers are encouraged to pay the taxes they owe in full. If taxes are not paid, and no effort is made to pay them, the IRS can ask a taxpayer to take action to pay the taxes, such as selling or mortgaging any assets owned or getting a loan. If the taxpayer continues to make no effort to pay the bill, or other payment arrangements have not been made, the IRS could take more drastic measures, such as levying bank accounts, wages, or other income, or taking other assets. A Notice of Federal Tax Lien could be filed that may have a detrimental effect on a taxpayer’s credit standing.

The penalties and interest charged by the IRS are substantially higher than most commercial lending rates, so it is generally better to borrow the funds elsewhere and pay the IRS in full. Where taxpayers cannot raise part or all of the funds to pay their taxes by conventional means, the IRS offers credit card payment and installment agreements.

Credit Card Payment – Payments can be made by credit card. However, the IRS does not pay the discount fees of credit card companies, so that is an additional fee that will be added to your credit card charge. If you are considering paying by credit card to increase your airline miles, forget it. The cost is more than the miles are worth! Payments by credit card can be made through one of two official vendors:

• Official Payments Corporation at 1-800-2PAYTAX (1-800-272-9829) –, or

• Link2Gov at 1-888-PAY1040 (1-888-729-1040) –

Installment Agreement – Taxpayers wishing to pay off a tax debt through an installment agreement, and owe:

• $25,000 or less in combined tax, penalties, and interest can apply for an installment agreement using a simplified procedure.

• More than $25,000 in combined tax, penalties, and interest may still qualify for an installment agreement, but must complete a more complex application including the submission of financial statements.

The IRS user fee for setting up an installment agreement is $52 for direct debit agreements and $105 for non-direct debit agreements. Certain low-income taxpayers will qualify for a reduced fee of $43. These fees must be paid with the first installment. You will also be charged interest and may be charged a late payment penalty on any tax not paid by its due date, even if your request to pay in installments is granted. Interest and any applicable penalties will be charged until the balance is paid in full.

If you are unable to pay your liability in full, please call this office as soon as possible. Procrastination can lead to further problems, penalties and interest.

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