How to Pay Your Taxes Off and Stay Out of Debt

how to pay your taxes off stay out of debt avoid irs penalties

Ignoring a tax bill from the IRS is financial suicide. If you let it get out of hand, you might end up spending the rest of your life paying off your tax debt.

Worse still, you could expose yourself to IRS tax collection procedures one of which includes jail time.  Remember, the IRS carries the full force of the federal government behind it.

So don’t test their patience. Settle your taxes quickly and try to stay out of debt. Here’s how to pay your taxes.


1. How Do You Pay Taxes Using Automatic Payments

If you’re wondering, “Can I pay my taxes online?” The answer is yes, you can. You probably use your online banking facility to set up automatic payments to settle your monthly bills right?

You can do the same thing for your taxes. Set up your automatic payments to the IRS in your banking portal to pay your taxes any time before the April 15th deadline.

Don’t forget to include your taxpayer information on the payment details. Your taxpayer information is usually your Social Security number. Also ensure you indicate your name, address information, the tax period and the form which is usually Form 1040.


2. How to Pay Taxes Using Checks or Money Order Payments

Can you make payments to the IRS using checks or money orders? The answer is a resounding yes!

If you’re looking for a cheap and convenient way to pay off your taxes, then you should know that the IRS still accepts the modes of payment. You don’t have to drive any anywhere to do it.

Simply take out your checkbook or money order, indicate “US Treasury” on the payee line and state the amount you wish to remit. The IRS actually recommends that taxpayers use this mode of payment since it’s a lot harder for someone to forge your details if your check ended up stolen.

Since your check already has your name and address, indicate your taxpayer information, the tax period and Form 1040. You could leave the check in an envelope inside your mailbox.

But, you would rather drop the envelope yourself into the drop box at the post office. The date when your envelope is post-marked is what the IRS uses as the payment receipt date.


3. How to Pay Your Taxes Using a Debit Card

Just like you would swipe your debit card at the grocery store when shopping for groceries, you can also swipe your card to pay off your tax debt. However, the service isn’t free.

Card companies typically charge a fee for the transaction. If you’d rather save the money and buy yourself a Cappuccino instead, you should consider another payment option.


4. Pay Federal Taxes with Credit Card

While this may not be the ideal way to settle your tax debt, it is an option as well. The IRS doesn’t charge you for swiping your card, but the plastic card company that makes it possible certainly will.

When you use your credit card to make a payment, the merchant incurs a fee that ranges between 1.8% and 3.9%. The merchant absorbs this fee as the cost of doing business.

Uncle Sam isn’t as considerate. The IRS will make you foot the expense of processing your card payments. There’s a silver lining though.

You won’t pay as much. The IRS has negotiated fees that are a lot less than what merchants have to pay. Nonetheless, the amounts are still high for the average taxpayer.


5. Cash Is an Option Too

Don’t even think about sending cash through the mail for any reason much less to settle your tax debt. You can, however, visit your local IRS office and deposit the funds there.


How to Settle Your IRS Debt

Now that you’re well-versed in all the different payment methods available for paying off your taxes, what happens if you owe way more than you can afford? First off, try and pay off as much as you can before the filing deadline.

If you still can’t pay off everything you owe within a short period after the deadline, you should get in touch with the IRS and request for additional time to settle your taxes. They typically grant you an additional 60 to 120 days to pay. If that period is still too short for you to completely settle your debt, here’s what you can do:


1. Get into an Installment Agreement with the IRS

The IRS allows you to make monthly installment payments of you can't afford to settle the full amount of tax debt you owe in the allotted time period. Download and fill in IRS Form 9465 and request for an installment plan.

To increase your chances of the IRS agreeing to this, you should try your best to settle a portion of what you own and request an installment plan on the outstanding balance. If you fell prey to a Ponzi Scheme the IRS allows you to recoup a portion of your losses.

It’s a complex process but it can certainly help you reduce the taxes you paid in previous years. Ensure you also check that you don’t have any tax credits you can take advantage of. These unique costs could reduce the amount you owe in taxes.


2. Offer in Compromise Program

This is a program that allows your pay-off your taxes at a reduced dollar rate. The beauty of it is you pay a portion of the original debt as you full and final settlement.


3. Not Currently Collectible Program

If you don’t have the ability to settle your tax debt in the near future you can benefit from the Not Currently Collectible Program. The IRS lets you off the hook for a year or more until you recover financially.

After the period elapses you should be able to resume making your tax payments. It gives one an opportunity to explain their situation and reach an amicable settlement without the IRS levy or seizure.


The Bottom Line

The IRS appreciates open communication. If you can adequately plead your case to the IRS you reduce your chances of contact with the IRS agents. You also increase your chances of a tax settlement.

Communicating your status offsets possible penalties and undesirable tax collection methods. Tax debt has to be settled. There are no two ways about it.

It’s up to you to do it the easy way or the hard way. Now that you know how to pay your taxes, we recommend doing it the easy way.

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