 internal revenue service IRS tax news tax time guide electronic tax payment and agreement options available to taxpayers who owe but first an attempt at a joke I apologize in advance I used to be a movie buff but lately I've really let myself go and I don't mean to the movie theater I mean I'm not even in good movie shape these days at least not good new movie shape every movie seems to be some kind of reboot or remake which used to excite me like an interesting new work at machine at the gym I thought it would be the buffest most yokest uppest movie buff ever but after being disappointed so many times to the point I'm convinced movie makers are making crap on purpose just for the thrill of disappointing me like a cruel clown telling a kid they have a super cool surprise only to let them down with some lame mockery of the promised item the cruel clown reveling in the disappointment they created or more accurately and the joy they destroyed now I see every new movie release as just an advertisement to go back and watch the original thankful they have not scrubbed all the media platforms of the old original good stuff as they replace it with the new unoriginal wrecking balls of good stuff oh no they're taking out the good stuff wrecking ball to another classic franchise as I clutch my horribly scratched up old DVDs DVDs I never thought I would ever need anymore as we moved into the age of the Internet they still work however talking to people about movies is a little difficult Star Wars comes up for example I bring up Luke the entire room stares at me Luke that pacifist green alien milk drinking wussy who died from meditating too hard masters of the universe came up one time I mentioned he man and it was informed that he man was so lame he died in the first episode and I was like but wait a second isn't he man the main character of masters of the universe they were like what no he man is some old dude that couldn't hack it so the world got lame and that's where the show starts and I was like wow that's certainly subverted my expectations honestly is this what happened to the prior generations growing up watching cowboy movies only to have later generations thinking every cowboy is like that one dude from ymca I are 2022 dash 63 March 22nd 2022 Washington the Internal Revenue Service today reminded taxpayers who have a tax bill that there are several ways to make payments and there are options for many people who can't pay their tax bill in full by April tax deadline so quick recap on how the IRS wants to be paid so for tax year 2021 for example they want to be paid during 2021 if you do not pay them during 2021 then they pull out that stick and they hit you with it and that's called penalties and interest now most people if you're a W2 employee will experience the payment throughout the year through the withholdings your employer taken the withholdings out of the pay so you never really see the money they just take it out of the pay and then you see it on the W2 and you see it on the pay stubs as well and you report that on the W2 and usually we shoot for we aim for we try to withhold a little bit more than is actually going to be owed not so that you can get a refund necessarily but so that you avoid the stick of penalties and interest in other words if you do not pay during the tax year and you try to pay all at April 15th of the following year or in this case April 18th then you'll get hit the IRS pulls out the stick and starts hitting you with it that's called interest that's called penalties and interest that's what the stick is called they named their stick their stick is named penalties and interest so you might have another kind of payment plan if you're retired or possibly if you have a schedule C type of business and you don't have the withholding situation you might have to make estimated payments now as you make the payments or as you have the withholdings you might be thinking well how does that even work because I have no idea how much my tax will be given the fact that the tax law seems to be changing quite rapidly from year to year my income thresholds have changed quite rapidly and there's so many factors they go into the tax code plus there's a progressive tax system how do I know how much to pay during the year of 2021 with all those factors involved because you would think you'd have to file the tax return given all those factors and then figure out how much you owe in order to figure how much you have to pay well the iris of course wants you to make an estimate so we got to estimate how much we're going to owe and then make the payments during the year trying to overshoot to avoid the stick that the iris is labeled and named penalties and interest that they'll hit you with if you don't if you don't do that so that means that if you owe money by April 18th then you still need to pay it by that point in time even if for example you go on extension you might say well I will go on extension that doesn't extend the time to pay that avoids that other stick of penalties and interest related to the deadline possibly of those kind of those kind of penalties but you still have to pay them on time so many people might get the idea that they're just going to say well I don't I can't make the payment and therefore I'm just not going to file the tax return and you really don't want to do that because note what happens is the iris doesn't really usually whack you with the stick right away they wind up they wind up so you might say hey it's okay I didn't file my taxes I didn't pay anything but then the penalties and interest builds up as the iris kind of winds it winds that stick up and then at some point it will hit you so you don't want to do that you want to set up typically a payment plan of some kind so that's your in compliance and you're minimizing the amount of penalties and interest even if you can't pay the tax at the point in time that the tax return is due that's the general rule so the deadline to submit 2021 tax return or an extension to file and pay tax owed this year falls on April 18th instead of April 15th because of the Emancipation Day holiday in the District of Columbia thank you District of Columbia and your Emancipation holiday gives us all a couple more days that's nice taxpayers in Maine and Massachusetts have until April 19th 2020 hey that's not fair apply to the whole country apply to the okay whatever i'm over it to file their returns due to the Patriots Day holiday to those states some taxpayers who were victims of a natural disaster there's a link to that here have even longer to file their returns the iris reminds people to timely file their tax returns and pay whatever they can by the filing deadline to avoid late filing and interest penalties that's what they named their stick they got their stick and they put it they put a name on it they burned the name into the into the wood sign sign in to pay and see payment history taxpayers can use their online account so you can log into your online account i recommend doing that because i think it's going to become more and more relevant going forward they took away the face identification kind of thing that seemed kind of weird that they needed that i'm i i tried to use it was hard but they took that away to securely see important information when preparing to file their tax return or following up on balances or notices taxpayers can make a same-day payment for a 2021 tax return balance on extension to file or estimate of taxes which are all due by april deadline for most taxpayers they can also view their adjusted gross income economic impact payment amounts and advanced child tax credit payment amounts needed for their 2021 return so all that stuff these prepayment things which is the iris's new thing that's their new go-to cool tool uh you got it you could find those if you log into your website that can help you out to fix the return and file the return properly which you want to do because if you don't it might go into the processing pile which is infinitely long or something like almost infinite for all practical purposes at that point which could delay the tax return so payment history and any schedule of pending payments you can see that payment plan details will be there so if you want to set up your payment plan you can do it kind of automatically you don't have to talk to anyone or anything you won't be able to talk to anyone most likely if you try to call them or something but you could typically set it up still pretty easily on the iris website or something like that possibly in your account digital copies of select notices from the irs can also be seen in your account so ways to pay electronic fund withholding so we got the good old efw this option allows taxpayers to file and pay electronically from their bank account when using tax preparation software or a tax professional this option is free and only available when electronically filing a tax return we got the direct pay direct pay there's a link to these pay items by the way direct pay is a free and allows taxpayers to securely pay their federal taxes directly from their check-in or savings account without any fees or free registration taxpayers can schedule payments up to 365 days in advance after submitting a payment through direct pay taxpayers will receive immediate confirmation that's nice i like confirmation to happen immediately right away electronic federal tax payment system we got this option this free service gives taxpayers a safe and convenient way to pay individual and business taxes by phone or online so you could do it even by the phone on that one and i mean like actually calling by phone like not by phone and online like using the phone as a computer i mean using the phone like like the phones used to be so enroll for more information taxpayers can call 800-555-4477 or visit the efts.gov website there's links to that here credit card debit card or digital wallet you can pay with the digital wallet even these days individuals do you have to tell the irs and they put you on the list if you pay with a digital wallet i wonder i think you do i would think but any case individuals can pay online by phone or with a mobile device through any of the authorized payment processors the processor charges a fee the irs doesn't receive any fees for these payments authorized card processors and phone numbers are available on irs.gov forward slash payment i think the digital wallet they don't mean like bitcoin i don't think or anything like that i think i do they mean like a paypal or something i haven't paid for the digital wallet so i don't know but if that's the way you want to pay you can look into it i don't have any experience with that i'm just reporting i'm just reporting what i'm seeing here cash for taxpayers who prefer to pay in cash this is weird you can pay in cash i mean maybe that's beneficial for some people i kind of feel like it's made for drug dealers or something you know like why would you pay it seems kind of weird but maybe it's maybe it's a good thing you can pay in cash if you want to and like usually you would want an audit trail so normally i would say you probably that's probably not the best way to pay but if that's what you got you got cash under that mattress in the riverbank maybe the best place to have it these days with the whole inflation thing and you know all that stuff but in any case the irs offers a way to pay taxes at one of its cash processing companies at participating paying retail stores the irs urges taxpayers choosing this option to start early because it involves a four step process four step process details including answers to frequently asked questions are at irs.gov forward slash pay with cash there's a link to that here check or money order payments made by check or notice they put this one at the bottom they don't they don't want to get a check because that means a physical thing has a physical person needs to open the check so again from a payment standpoint that might be a good thing actually you might say hey if you if you don't have anyone over there to open my check as long as you don't hit me with your stick of penalties and interest and you don't cash the check for the next 30 years until you get things under control over there that's okay but you know i kind of like to see the payment processed anyways just to get confirmation in case they lose it or something so payments made by check or money orders should be made payable to the quote united states treasury in quote to help ensure that the payment gets credited um promptly taxpayers should also enclose a form 1040 v that's the voucher payment voucher and print on the front of the check or money order quote 2021 form 1040 you got to make sure that they apply to the right year because it's quite possible if you don't do that they applied to like 2022 or something like that and then or they apply to the prior year maybe and then they send it back to you and then they charge you penalties and interest because you didn't pay them but you did pay them they just applied it to the wrong period so make sure whatever payment methods you're using digital or actual physical check you properly label where and what year you want the payment to be applied to so you need the name address time phone number social security so filed by april 18 2022 most taxpayers the most important thing everyone with a with a tax bill should do is file a return by april 18 do date for most taxpayers even if they can't pay in full so even if you can't pay you want to file the tax return and you want to try to estimate how much money you owe so you can still put yourself on extension that's okay but that doesn't wipe out the fact that the iris wants their money by that point in time so if you owe them money you want to pay them you want to pay them to avoid the stick the penalties and interest of course taxpayers may also request a six month extension to file by october 17 2022 to avoid penalties and interest for failing to file on time though automatic tax filing extensions are available to anyone who wants one these extensions don't change the payment deadline so be careful with that there's two different sticks there's two different sticks they got a lot of sticks over there they picked the one that they want to hit you with so there's two different ones you got penalties related to the filing on time and penalties related to payment on time so keep those separate in your mind so it is not an extension to pay visit irs.gov forward slash extensions for details there's a link to that here usually anyone who owes tax and waits until after that date to file will be charged a late filing penalty of five percent per month so if a tax return is complete filing it by april 18 is always less costly even if the full amount due can't be paid on time irs free file is an easy quick way to file that is available to eligible individuals and families who earned seventy three thousand dollars or less so you got that free file option there's a link to the irs free file here you can find it on the irs website irs.gov of course pay what you can so if you can't pay the the general rules you want to pay what you can so what are you trying to do if you can't pay the tax you know you owe money you can't pay it you want to make sure that you're still in compliance because if you're not the irs is likely to hit you with with the sticks and you want to pay as much as you can typically because even if you're in compliance by setting up a payment plan you you're still going to be charged some interest on in possibly some penalties and then you want to set up a payment plan that that helps you to be in compliance and once again lowers the number of penalties and interest which is the goal so interest plus the late payment penalties will apply to any payments made after april 18th making a payment even a partial payment will help limit penalties and interest charges the fastest and easiest way to pay a personal tax bill is with direct pay available only on irs.gov for a rundown of other payment options visit irs.gov forward slash payments there's a link to that here the irs urges taxpayers to first consider other options for payment including getting a loan to pay the amount due in many cases loan costs may be lower than the combination of interest and penalties the irs must charge under the federal law so you might say hey if they're going to charge me penalties and interest maybe i'll just take out a loan and then i'll pay it off with the loan and then i'll pay back the loan which i got to pay interest on but possibly it's going to be less than the penalties and interest charged by the irs possible could be happy so normally the the late payment penalty is one half of one percent point five percent per month that is the interest rate adjusted quarterly is currently three percent per month compounded daily if a loan isn't possible the irs can often help online payment plans most individual taxpayers qualify to set up an online payment plan with the irs and it is only takes a few minutes to apply so you can do it online you don't got to talk to anyone or anything like that about the fact that you you know like you don't want to pay if you can't pay the tax bill or anything you should be able to do it automatically so make sure to be proactive and do that so that you avoid the sticks the sticks not the sticks applicants are notified immediately if the request is approved no need to call or write to the irs the irs notes that online payment plans are processed more quickly than request submitted with electronically filed tax returns if a taxpayer just filed their return and knows that they'll owe a balance they may be able to set up a payment plan online before they even receive a notice or bill there are two main types of online payment plans you should be aware of there's a short-term payment plan the payment period is 180 days or less and the total amount owed is less than 100,000 in combined tax penalties and interest there's no fee for setting one up though interest and late payment penalty continue to accrue and then there's the long payment plan payments are made monthly and the payment owed must be less than $50,000 in combined tax penalties and interest if the irs approves a long payment plan also known as an installment agreement a setup fee normally applies so there's a link to the setup fees you got to make a payment to set up the plan but low-income taxpayers may qualify to have the fee waived or reimbursed so if you're a low-income taxpayer you might be able to look into further how to waive the setup fee in addition for anyone who filed their return on time the late payment penalty rate is cut in half while an installment agreement is in effect this means that the penalty accrues at the rate of one quarter of one percent or point two five percent per month instead of the usual one half of one percent or point five percent per month taxpayers who do not qualify for an online payment agreement may still be able to arrange to pay in installments see additional information on payment plans for more information other payment options some struggling taxpayers may also consider using these other payment options we got the delayed collection if the irs determines a taxpayer is unable to pay it may delay collection until their financial condition improves however the total amount owed will still increase because penalties and interest and charged until paid in full taxpayers can request a delay by calling the phone number on their notice or 800 8291040 then we have the penalty relief some taxpayers qualify to have their late filing or late payment penalties reduced or eliminated so if you get the payment and penalties sometimes you might it's like kind of like calling the credit card company and being like hey come on this is the first time i've ever had a problem waive the penalty for me would you and something like that and you can do you could do that sometime if you're in good standing with the irs possibly you may be able to do that this can be done in a case by case basis based on reasonable cause so there's a pretty vague term i have reasonable cause to eliminate these these penalties and interest please would you remove them alternatively where a taxpayer has a history of compliance the irs can typically provide relief under the first time abatement program so notice of course they're trying to keep people in compliance so if you are in compliance they're more likely to to waive penalties and interest or something like that in a first time abatement type of program kind of situation similar to the credit card situation if you pay your credit card on time and everything and you get a late payment one time or something like that they're willing to work with you oftentimes but if you do it all the time they're like no i don't think so because i don't trust you i don't trust you visit irs.gov forward slash penalty relief for details there's a link to that then you got the offer and compromise some taxpayers qualify to settle their tax bill for less than the full amount due through a offer and compromise though there is typically a $205 non-refundable application fee it is generally waived for low income taxpayers and for offers based on a doubt as to liability the offer and compromise pre-qualifier tool there's a link to that here can help determine eligibility for for anyone interested in applying now note that the offer and compromise is one of those types of things that you see advertisements for and whatnot for people saying hey we'll lower your tax bill if your tax bill is over 10 000 or whatever 15 whatever they say then we can lower the tax bill usually they're talking about kind of a copper offer and compromise or that's the main tool that they're kind of alluding to so just realize that that you want to make sure that you're going to a legitimate place if you're seeking help with an offer and compromise and because a lot of times you go to it like an advertisement these these commercials might just be an advertisement not even a really a firm that then allocates you to a firm which means you don't know exactly who you're you're working with so you want to make sure that that to be aware of that and also you can get a pretty good jump on whether or not you would qualify for the offer and compromise because it's all basically laid out in in the code so you can read up on it yourself and whatever and everything and clearly the idea would be similar to an idea between a bank lending money and the individual if the individual can't pay back the money then the bank would be incentivized to lower the amount that is going to be paid would be the general idea because they're not going to get the money anyways and you got the similar kind of thing here so you would under you would think what would the what would the government want in order to give an offer and compromise they want a personal basically income statement and balance sheet they want to know how much stuff you have how much you are taking in to determine whether or not you should qualify for for an offer and compromise possibly lowering the tax bill due to the fact that you're not going to be able to pay the tax bill which would be beneficial then to lower it on both sides of the transaction on the payer side and the recipient side so the IRS reminds taxpayers that they have rights and protections through the collection process for details see taxpayer bill of rights and publication one for rights as taxpayers for more information about payments the topic number 202 tax payment options on irs.gov taxpayers should know before they owe the irs encourages all taxpayers to check their withholding with the irs the tax withholding estimator this news release is part of a series called the tax time guide a resource that helps taxpayers file an accurate tax return additional help is available in publication 17 for federal income tax there's a link to all this wonderful stuff here and there'll be a link to this in the description