27
Oct 14

MONTHLY TAX UPDATE

You either filed your taxes on time or filed an extension and owe taxes.  It’s not unusual for taxpayers who owe taxes to file an extension to prevent collections from beginning.  However, it may be of interest that the Internal Revenue Service (IRS) offers several payment options.  Here are some key points to keep in mind.  Never send cash.  Electronic payment options are the quickest and easiest way to pay your tax.  Check out IRS Direct Pay or EFTPS to pay directly from your bank account.  It’s secure and free.  You’ll get instant confirmation that you have submitted your payment.  You can pay taxes electronically 24/7 on IRS.gov.  Just click on the payments tab near the top left on the home page.  If you filed an extension, you may be able to pay through your tax software when you file the return.  Another method is to choose the option to pay with a credit or debit card.  This is accomplished by going to the irs.gov website and be advised that the company processing your payment will charge a processing fee.  You may be able to deduct the credit or debit card processing fee on next year’s return.  It’s claimed on Schedule A, Itemized Deductions.  You may enroll in the Electronic Federal Tax Payment System (EFTPS).  The EFTPS method permits you to pay your federal taxes electronically.  You have a choice to pay using the Internet, or by phone using the EFTPS Voice Response System.  If you can’t pay electronically, you can still pay by a personal check, cashier’s check, or money order.  Make it payable to the “United States Treasury.”  Be sure your name, address and daytime phone number appears on the front of your payment.  Also, write the tax year, Form 1040, and your Social Security number in the memo section of the check and you’ll use the social security number shown first, if it's a joint return payment.  You will also send a completed Form 1040-V payment voucher in the envelope with your payment or mail it with your tax return the IRS.  Make sure you send them to the correct address listed in the instructions for the Form 1040-V.  This will help the IRS process your payment and post it to your account correctly.  You can get the form on IRS.gov/forms at any time.  If you can’t pay your tax in full, the IRS urges you to still file your tax return on time.  You should pay as much as you can with your tax return. This will help keep your penalty and interest costs down.  If the amount you owe is more than you can pay in full, then establish an installment agreement which will allow you to pay the balance overtime.  There will be a processing fee, charged by IRS, when you establish this arrangement.  There is an Online Payment Agreement tool on IRS.gov that makes it a real easy way to apply if the amount due is under $50,000.  Finally, if the amount is more than you can handle and you know there isn’t anyway that you’ll ever pay it off, you may feel enticed to call one of the scammer advertising entities that will charge you unbelievable fees and to never settle the debt.  I would advise you to determine if an Offer in Compromise is possible first.  You can go to the website “http://irs.treasury.gov/oic_pre_qualifier/” to determine if an offer in compromise is possible.  If you find you fall within the parameters, I recommend you seek the assistance of a local Enrolled Agent, Certified Public Accountant, or an Attorney to prepare the documentation and settle the debt.  Steer away from the “We can reduce your tax liability” nationwide advertising solicitors due to excessive billing techniques.  For details and specific assistance in applying the general information in this article, call us at your earliest convenience or contact your tax advisor.   Provided by Tracey C. Higginbotham, E.A., (321) 632-5726, a member of the National Society of Accountants.