When working with tax clients, it is important they understand the difference between the filing of their tax returns and the paying of the tax due on these returns. These two tasks are mutually exclusive and we certainly get the question “Can I get a payment plan for my income tax owed?”
If money is owed on a tax return, it is important to pay it as soon as possible. You can always pay online at https://www.irs.gov/payments/direct-pay OR have your advisor print out a voucher or estimated tax form to pay the tax due. But many of us cannot afford to pay the tax in full or at all and the IRS has a program and a form to work with taxpayers.
IRS form 9465 is a simple 1 page document that can be filled out so a taxpayer can set up a payment plan with the IRS. The name, address, social security number, and banking information are included on the form. Setting this up will include the amount that will be paid with filing of the form, the amount that will be paid monthly over 72 months, and the date the total amount will be paid in full. It is really that simple. For example, if the client owes $10,000 and they can pay $1,000 up front, the form will show $9,000 owed divided by 72 months = $125/month. Sign the form, make a copy of it, and mail to the IRS with the check made out to Department of Revenue for $1,000. The IRS will inform you of the approved payment plan.
If the amount owed is less than $50,000, using IRS form 9465 is a great way to go when money is owed to the IRS and the amount cannot be paid in full. Of course, owing money to the IRS is not recommended so paying the debt off earlier than 72 months should be the goal.
What if you owe more than $50,000? If this is the case, you will have to provide far more detailed information to the IRS before they accept any type of payment plan. If you choose to make an offer in compromise, the IRS will dig even deeper to find out if your offer is worth accepting. Sit with your advisor soon to review these alternatives and determine which is the best method for you to pay your tax to the Government.
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About Stu: With more than 30 years of experience as a tax professional, Stu Steinberg brings a broad depth of knowledge to his work with his clients. Stu founded Erock Tax to help provide tax and financial planning strategies to individuals, families and small businesses and is passionate about empowering his clients through education about their money health. Stu is highly energetic and brings a sense of optimism, creative problem-solving and a deep level of commitment to every Erock client.