When you owe taxes explained

1.Pay the total balance owed by the filing deadline, or as quickly as possible to minimize penalties and interest you will be charged.

2. If you can't pay, try and get a loan or pay with a credit card (see No. 4 below). The interest on a loan or credit card is sometimes lower than penalties and interest charged by IRS and/or state.

3. Set up an Installment Agreement/Payment Plan (IRS Form 9465) with the IRS and/or the state. (California requires that an automatic debit be set up – No is form required.)

Some things to note about installment agreements:

  • Penalties and interest will be added to your balance due even if you have an installment agreement.
  • Make your initial payment by the filing deadline using the payment voucher (federal form 1040V), provided by Summit Financial Group
  • Sign and mail the Installment Agreement Request provided by SFG.
  • If you don't have a payment notice from IRS by the next agreed-upon date, make your payment anyway. While the IRS advertises that they will send payment notice within 30 days, we find it often takes two to three months. The IRS keeps good records of what you owe, so note in the memo section of your check the primary taxpayer's social security number and year the taxes are for and the payment will get credited to your account.
  • You may also opt for direct debit from your checking or savings account.
  • A one-time user fee will be deducted from your first payment to set up the installment agreement.
  • Failure-to-pay penalty: You will have to pay a penalty of 1/4 of 1% (accrued daily) of your unpaid taxes for each month or part of a month after the due date that the tax is not paid. This penalty cannot be more than 25% of your unpaid tax.
  • Interest: This is calculated based on how much tax you owe. Interest rates change every three months. Check irs.gov for most current rates.

4. Paying with a credit card: Credit card options are available through a service provider; a convenience fee is charged, usually equal to 2.49% of the balance.

Please be aware that filing for an extension (of time) to submit your return does not grant you any extension of time to pay your tax liability.

This information is not intended to be substitute for specific individualized tax or legal advice. We suggest you discuss your specific tax issues with a qualified tax advisor.