It's the first year I've ever owed taxes, and my emergency fund is thankfully taking care of the over-sized bill. A growing number of unemployed Americans are having to use their rainy day funds to cover everyday expenses, so there's a greater chance these taxpayers won't be able to afford their tax bills.
Turning a cheek to your taxes will only create a bigger debt to the IRS so it's imperative that you face your tax bill head-on. Taxpayers may opt for an installment payment plan if the amount is more than you can handle. Learn how to take advantage of this option when you,
- There are two ways to apply for an installment payment plan: Taxpayers who file electronically may apply online using the Online Payment Agreement application. Those who mail-in their tax returns can attach Form 9465 (Installment Agreement Request) to their tax return.
- You must indicate a proposed monthly payment amount and the date of your choice that payment will be submitted each month.
- Setting up an installment plan isn't free, but it's cheaper if you set up payments to be deducted directly from your bank account. This option will cost $52 for set-up, while a manual payment set-up costs $105. Qualified lower-income taxpayers will be charged $43 for installment plan set-up.
- Setting up an installment plan saves you from the IRS filing Notice of Federal Tax Lien, but it doesn't save you from paying interest on the amount owed and the installment plan will appear on your credit report.
For more information on setting up an installment payment plan, visit the IRS website.