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Paying Back Taxes LifeBack Tax
If you owe taxes to the Internal Revenue Service, you can pay your balance online, by mail, or with cash at a retail partner. Taxpayers can make online payments through IRS Direct Pay, EFTPS, or by credit/debit card. IRS Direct Pay allows individual taxpayers to pay directly from a personal bank account, and can be used to pay toward past and current tax years. Direct Pay accepts up to 2 payments within 24 hours, and each transaction is limited to $100 million per payment. Direct Pay also does not accept payments from a business account. Instead, business taxpayers may register with the Electronic Federal Tax Payment System (EFTPS) to pay their taxes online. If you choose to pay by credit or debit card rather than directly from a bank account, note that card payments are subject to a third-party processing fee. Online payments may take 2-3 business days for the IRS to process.
Alternatively, taxpayers may also pay their balance by sending a check or money order in the mail, made payable to the U.S. Treasury. The IRS may take 10 business days to process mailed payments, and each check is limited to $100 million per payment. Note that the IRS does not accept cash payments in the mail. Instead, taxpayers may visit a retail store partnered with the IRS to deliver their cash payment. Cash payments are charged a convenience fee, are limited to $1000 per day, and may take 5 to 7 business days to process.
Upon receiving a notice and demand for payment from the IRS, taxpayers are advised to immediately contact the IRS to determine their timeframe for payment. The most effective way for a taxpayer to avoid additional charges is to immediately pay their balance in full, using one of the methods indicated above. Paying taxes within the notice's due date prevents further penalties and interest from accumulating, and settles the taxpayer's liability before the IRS resorts to enforced collection actions.
If you are unable to pay your balance within the due date, you may enroll in a short-term payment plan, also known as a full payment agreement. A short-term payment plan gives taxpayers an extension of 120 days to pay their balance in full. However, penalties and interest continue to accumulate on late taxes until the taxpayer has fully paid their balance. Individuals may apply online for a short-term payment plan if they owe $100,000 or less in taxes. Otherwise, individuals or businesses may apply for a short-term payment plan by phone or mail.
If you will need more than 120 days to pay your balance, you may enroll in a long-term payment plan, also known as an installment agreement. Under a long-term payment plan, a taxpayer pays their balance through fixed monthly installments over a timeframe of no more than 6 years, including penalties and interest. In addition to the payment options described earlier, a long-term payment plan may be paid through a Direct Debit or Payroll Deduction agreement. When paying through voluntary Payroll Deduction, the taxpayer has part of each paycheck withheld by their employer and sent to the government. When paying through a Direct Debit agreement, the IRS automatically withdraws funds from the taxpayer's bank account on a monthly basis. Unlike involuntary wage or bank levies, a voluntary installment agreement allows the taxpayer some input on the size of each payment.
In addition to penalties and interest, taxpayers applying for a long-term payment plan must also pay the IRS a one-time setup fee. This setup fee is reduced if the taxpayer applies online or pays through Direct Debit. Taxpayers may apply online for a long-term payment plan if they are an individual who owes no more than $50,000 in taxes or a business who owes no more than $25,000 in taxes. For individual taxpayers who owe more than $25,000 and businesses who owe more than $10,000 in taxes, the IRS requires that any long-term payment plan be paid through a Direct Debit agreement.
However you choose to pay the IRS, we recommend taking steps to resolve your tax liability sooner than later. The government can be relentless when collecting unpaid taxes, and may enforce collection through harsh means such as tax liens, administrative levies, wage garnishments, or bank levies, among others. If you are currently struggling to settle your debts with the IRS, please contact us right away. Here at LifeBack Tax, we are committed to defending the common taxpayer from the government. We can negotiate with the IRS on your behalf to setup the best payment plan that accounts for your financial needs.
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