Taxpayers Who Owe Have Various Options to Pay

If you are a taxpayer who owes Federal taxes this year, explore the payment and filing options that can help you avoid penalty and interest charges. Those who have tax liabilities can take advantage of several options to pay before the April 15 filing deadline. First, the IRS will also allow you to pay by check, or charge your taxes owed on deadline. First, the IRS will also allow you to pay by check, or charge your taxes owed on American Express, Master Card, or Discover Card. In addition, those taxpayers who file electronically can authorize a direct debit from a checking or savings account. Finally, there is always the option of taking out a loan if you still cannot afford to pay your taxes.

You may also file an extension, or apply to make installment payments, but in this case you will have to pay additional penalty and interest charges. By filing an extension, a taxpayer only postpones the filing process, not the payment requirement. If 2002 taxes are not paid by April 15, 2003, the taxpayer will face penalty and interest charges.

Charging a tax bill is available for taxpayers paying the balance owed on a return, a projected balance of taxes due on a request for an automatic extension, or an estimated tax payment. Separate payments should be made when charging estimated taxes. Call 1-888-2PAY-TAX to charge your tax bill or visit, or 1-888-ALL-TAXX, or visit the web site, Unfortunately, those who charge will pay a “convenience fee” based on the amount charged.

To file an extension, a taxpayer should file Form 4868, Application for Automatic Extension of Time to File US Individual Income Tax Return. Taxpayers who charge an automatic extension or estimated tax payment will not have to file the paper Form 4868 or 1040-ES. By filing Form 2688 Application for Additional Extension of Time to File US Individual Income Tax Return and with IRS approval of that extension request, the taxpayer has until October 15, 2003 to file 2002 taxes. Eligible taxpayers who owe the IRS money can also apply to make installment payments by filing Form 9465 Installment Agreement Request with their tax return. This alerts the IRS to the taxpayer’s intent to pay taxes owed. The taxpayer will be subject to penalty and interest, but will not incur a failure to file penalty. The entire amount of tax liability must be paid off within the following year.

Finally, remember that you do not necessarily have to pay the amount you owe when you prepare and file your taxes. Rather, you can electronically file your tax return in February or March, and wait until April 15 to send in your payment. This is the most preferred method because it allows you to determine ahead of time how much you are going to owe. Then you have time to set in place a plan to pay your taxes, instead of scrambling at the last minute and incurring penalties and interest charges. In any case, if you think you are going to owe money, the key is to plan ahead and assess all your payment options.

This article was contributed by Craig Habicht, President of Liberty Tax Service, 301-733-6990.