This Wednesday, the 15th of April marks the annual Tax Day, which is basically the deadline for filing your 2014 tax returns. In case you didn’t withhold enough money for your taxes out of your paycheck this year than you might be surprised to find a tax return form in your mailbox.
So to help you get through this year’s tax day we thought we would give you a roundup of the basic information you might need. But before you start it’s very important to remember that if you fail to pay your tax bill by the 15th of April you will have to pay interest and penalties. That being said let’s start with:
1. When to pay your taxes.
The yearly deadline for your tax returns is April 15. If you fail to pay your taxes before this deadline you will incur some penalties even if you file an extension.
2. How and where to pay.
You can pay your taxes either by sending a check or money order, by credit or debit card or Direct Pay. The method that the IRS suggests is Direct Pay as the payment will be taken directly from your bank account through a secure service and you will immediately receive a confirmation number that you can print out if you are keeping your own records. If you choose to send out a check you should make it payable to the United States Treasury and you should make sure to provide your name, address, phone number, social security number, tax period and form number.
3. Paying taxes with credit or debit cards.
If you choose to pay your taxes through a credit card please keep in mind that there will be processing fees, usually between 1.87% and 2.35%. However that can be listed as miscellaneous itemized deduction on next year’s taxes. We only recommend using a credit card if you are 100% sure you can pay off your credit card statement the following month and avoid the interest rate. It’s much better to use a debit card as the transaction fees are only $2.49 – $3.50.
4. Tax payment extension.
If you are not able to pay your taxes in one single payment the IRS can offer an extension period of up to 120 days. While this extension is free to set up you will still accrue interest and monthly penalties until the bill is fully paid. You can call the IRS for an extension at (800) 829-1040 (individuals) or (800) 829-4933 (businesses). You can also use the Online Payment Agreement on the IRS website.
5. Tax payment in installments.
In case your tax bill is too large for you to handle you can pay in installments. Here are your options:
• Direct debit from your bank account;
• Payroll deduction from your employer;
• Payment via check or money order;
• Payment by Electronic Federal Tax Payment System (EFTPS);
• Payment by credit card via phone or Internet;
• Payment by Online Payment Agreement (OPA).
If you owe more than $50,000 and can’t pay the bill within the 120 day extension period you will need to follow the instructions found on Form 9465.
6. How to negotiate an Offer in Compromise.
Through an Offer in Compromise you can pay less than you owe to the IRS. If you want to do this you should seek professional advice. Also keep in mind that the IRS will only consider your offer in compromise if your filing and payment requirements are up to date. Find out if you are eligible for an Offer in Compromise on the IRS website.
7. Innocent Spouse Relief.
If you found out you were filing erroneous tax returns because of something your spouse or former spouse did you can use Form 8857 (Request for Innocent Spouse Relief) for some guidance in determining tax liability. After you fill the form the IRS will contact your spouse or former spouse and have them participate in the process. Once these proceedings are finished the IRS will inform you of their decision through a preliminary determination letter.
8. You can dispute your tax bill.
In case you disagree with the IRS concerning the amount of money you owe for taxes you can dispute them by filing a written protest. We recommend that you only do this if you have documented records and solid evidence to support your case. You can find instructions on filing a protest on the IRS website.
We hope this quick guide will make it easier from now on to file your tax returns and handle any issues you might have with the IRS.