IRS Offers Options When Tax Day Is "Pay" Day

WASHINGTON - If the tax filing deadline will be a "pay" day for you, the Internal Revenue Service offers several options to help you meet your obligation. It also has special programs for those who cannot pay what they owe.

If you’re sending a check or money order, make it payable to United States Treasury and include your Social Security number, a daytime phone number, the year and type of form filed -- for example, 1999 Form 1040. Use the Form 1040-V payment voucher if you have one and do not staple the payment to the tax return. Send any 2000 estimated tax payment separately.

While e-filing your return by computer or phone, you may authorize the Treasury to electronically withdraw the tax due directly from your checking or savings account on a specified date. This is similar to the electronic funds transfer arrangements many people have for their monthly mortgage, auto, utility or insurance payments, except this direct debit for income tax is a one-time payment. There is no charge for this service. More than 100,000 e-filers have authorized direct debit payments this year. You may also charge your taxes on a credit card. Anyone may call (toll-free) 1-888-2PAY-TAX to charge the balance due on a 1999 federal income tax return to an American Express, Discover Card or MasterCard account. You may also use this credit card system if you choose to make a payment related to an automatic filing extension request, or to make estimated tax payments for 2000. Taxpayers or return preparers who use Intuit or Orrtax software to e-file may charge a balance due by putting the credit card information into the electronic file they send.

Under both the phone and computer methods, private sector companies process the credit card transactions and charge convenience fees. The IRS does not collect such fees, nor does the IRS receive or store the credit card numbers. The cardholder’s account statement will show the tax payment and the fee separately. As of March 31, the IRS had received about 16,700 credit card payments, more than triple the number at this time last year, with an average charge of $1,362.

Those who cannot pay the full tax due may qualify for an installment payment plan. The IRS offers a streamlined approval process if the amount due is not more than $25,000 and the taxpayer will pay it within a five-year period. These agreements do not require a collection manager’s approval, and do not involve the filing of liens. You may ask for an installment plan when you file by attaching Form 9465, Installment Agreement Request, to the front of the tax return, listing the proposed monthly payment amount and date. You may also choose to conveniently make the payments from your bank account each month through a direct debit program.

There is a $43 fee for setting up the installment agreement. Taxpayers will also pay interest -- currently figured at nine percent per year, compounded daily -- plus a late payment penalty. This penalty, usually 0.5 percent of the balance due per month, drops to 0.25 percent when the IRS approves the agreement, if the taxpayer filed the return on time and did not receive a levy notice.

Besides possibly qualifying for this reduced late payment penalty, people who cannot pay the taxes owed have another reason to file on time -- to avoid the late filing penalty of five percent per month of the balance due. Sending as large a payment as possible with the return will lessen any interest and penalty charges. The IRS Web site at www.irs.gov has an interactive feature to help taxpayers determine their eligibility for an installment agreement and to download related forms. Form 9465 is also available by calling (toll-free) 1-800-TAX-FORM, or from IRS TaxFax. From a fax machine, call 703-368-9694 -- not a toll-free number -- and request item #14842 by return fax.

If you cannot possibly come up with the money to pay your taxes, even on an installment plan, you may apply for an offer in compromise to settle your tax debt for less than the full amount owed. The IRS will review your financial situation and future income potential in order to determine the appropriateness of your offer. Get Form 656, Offer in Compromise, and Form 433A, Collection Information Statement for Individuals, through the IRS Web site or the toll-free forms number. The IRS has received 70 million returns and processed more than 57 million refunds, totaling $95.6 billion. At $1,668, the average refund is almost six percent higher than at this time last year.

2000 FILING SEASON STATISTICS
Cumulative through the week ending 4/2/99 and 3/31/00
1999-2000
Individual Income Tax Returns
Total Receipts          69,618,000      70,175,000       0.8
Total Processed         60,363,000      63,511,000       5.2

E-filing Receipts:
TOTAL                   24,996,000      29,277,000      17.1
TeleFile (phone)         4,829,000       4,367,000     - 9.6
Computer                20,167,000      24,910,000      23.5
Tax Professionals       18,357,000      21,379,000      16.5
Self-prepared            1,810,000       3,531,000      95.1

Refunds Certified by the Martinsburg Computing Center:
Number                   54,886,000      57,301,000      4.4
Amount of principal     $86.431 billion $95.580 billion 10.6
Average refund            $1575           $1668          5.9
Direct Deposit Refunds:
Number                   18,953,000      23,783,000     25.5
Amount                  $39.328 billion $50.609 billion 28.7

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