Lots of ways to pay a tax bill

Posted: Sunday, February 04, 2001

WASHINGTON -- From credit cards to installment plans, the Internal Revenue Service offers taxpayers several options if they can't pay their tax bills in full.

Those who are unable to file their tax return by midnight April 16 -- the traditional date of April 15 is a Sunday -- also can ask for an automatic four-month extension. That extension, however, doesn't apply to any taxes owed, which must be paid on time.

''Filing for an extension does give taxpayers some extra time to make sure all of their paperwork is in order, but it doesn't push back the deadline to send the IRS a tax payment,'' said Kathy Burlison, senior tax specialist at H&R Block. ''In fact, you are required to estimate what you owe and send that amount with your extension form to the IRS.''

Any tax liability that isn't paid by the April 16 due date could be subject to interest and a late penalty, she added. Taxpayers should use IRS Form 4868 to request an extension. For another two months -- the IRS doesn't automatically grant these -- use form 2688.

There are a variety of ways to pay a tax bill:

n Credit Card. Taxpayers can use American Express, MasterCard or Discover to charge taxes due by calling either Official Payments Corp. at 1 (800) 2PAY-TAX (272-9829) or PhoneCharge Inc. at 1 (888) ALLTAXX (255-8299). A convenience fee is applied; Visa is not participating in the program.

Tax experts say people should carefully consider the interest rate on a credit card when deciding whether to use it. An IRS installment agreement currently charges 9 percent interest plus a late penalty of one-half percent -- one-quarter percent for taxpayers who filed returns on time -- compared to some credit card interest rates of 18 percent or higher.

n Installment agreement. IRS Form 9465 is used to request such a payment plan, which is guaranteed for taxpayers whose total liability doesn't exceed $10,000, haven't had an installment plan in the last five years and agree to pay the bill within three years or less, among other requirements. Interest, late payment penalties and a $43 processing fee also apply.

n Offer in compromise. For large unpaid tax liabilities, the IRS may accept a lesser amount if the taxpayer can't pay. Form 656 is used to make such an offer, and the debt can often be paid off over time with fixed monthly payments. If a taxpayer defaults, the entire original tax liability plus interest and penalties will be reinstated.

n Direct debit. Taxpayers who file returns electronically can have their taxes due debited by the IRS from a checking or savings account. Taxpayers can specify the date for the debit, meaning they can file their return early and then wait until April 16 to pay the bill.



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