Collection Procedural Questions
This is archived information that pertains only to the 2002 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
I am unable to pay my delinquent taxes. Will the IRS accept an Offer in Compromise?
You may qualify for an Offer in Compromise if you are unable to pay your taxes in full or if you are facing severe or unusual economic hardship. Refer to Tax Topic 204, Offers in Compromise, for additional information.
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Is there any special assistance available on unresolved tax matters which are creating a hardship?
If you are suffering, or about to suffer a significant hardship because of the way Internal Revenue laws are being carried out, you may ask for special help from the IRS' Taxpayer Advocate Program (formerly Problem Resolution Office). You may reach that office by dialing 1-877-777-4778 (1-877-PRP-IRSU).
References:
- Tax Topic 104, Taxpayer Advocate Service - help for problem situations
I owe money this year. Who do I make the check out to?
If you pay by check or money order, make it out to the "United States Treasury." Please show your correct name, address, social security number, daytime telephone number, and the tax year and form number on the front of your check or money order. Double check to make sure that you have printed your social security number correctly and that it matches the one used on your income tax return.
Enclose your payment with your return, but do not attach it to the form. If you received Form 1040-V, Payment Voucher, use it to send your payment to the IRS. This will help us process your payment more accurately and efficiently. Follow the instructions that come with the form.
You can also pay part or all of your tax by using a credit card (American Express Card®, MasterCard®, or Discover Card®). There are two credit card processors (also referred to as service providers) which offer this service: Official Payments Corporation and PhoneCharge, Inc. Both providers will charge you a convenience fee using a tiered fee schedule which can be found on their web sites. The IRS will not receive this fee. You can look up the amount of the convenience fee at http://www.official payments. com or, if you choose to use PhoneCharge Inc., at http:www.About1888ALLTAXX.com.
By phone, Official Payments Corporation can be reached at 1-888-272-9829 (1-888-2PAY-TAX) toll-free. Similarly, you may call PhoneCharge, Inc.at 1-888-255-8299 (1-888-All-TAXX). You will be told the amount of the convenience fee during the call. Then, you will have the option to continue or cancel the call. If you decide to continue, you will be given a confirmation number at the end of the call. Make a record of the confirmation number. Do not include the amount of the convenience fee as part of the tax payment. There is nothing to send in when you pay by credit card.
Can I ask to make installment payments on the amount I owe?
Yes. If you cannot pay the full amount due as shown on your return, you may ask to make monthly installment payments. However, you will be charged a one time user fee of $43.00, and you may be charged a late payment penalty unless you can show reasonable cause for not paying the tax by April 15, even if your request to pay in installments is granted. Before requesting an installment agreement, you should consider less costly alternatives such as a bank loan.
To request an installment agreement, send Form 9465 (PDF), Installment Agreement Request with your return or call 1-800-829-0922. You should receive a response within 30 days. For more details on installment payments, refer to Tax Topic 202, What to do if You Can't Pay Your Tax, or Publication 594 (PDF), Understanding the Collection Process.
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I just completed my return and find that I owe the IRS money. What should I do?
You should file your return even if you can't pay all of the amount you owe. File by the due date of the tax return and pay as much as possible. By filing on time, you avoid the late filing penalty. By paying as much of the amount you owe as possible, you reduce the amount of interest and late payment penalty that you will owe. If you are unable to pay the full amount of your balance, you can request an installment agreeement to pay the amount due with Form 9465 (PDF) or calling 1-800-829-0922. For more details on interest and penalties, refer to Tax Topic 201, The Collection Process, or Publication 594 (PDF), Understanding the Collection Process.
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What kind of penalties and interest will I be charged for paying and filing my taxes late?
Interest, compounded daily, is charged on any unpaid tax from the due date of the return until the date of payment. The interest rate is the federal short-term rate plus 3 percent. That rate is determined every three months.
For current interest rates, go to News Releases and Fact Sheets and find the most recent Internal Revenue release entitled Quarterly Interest Rates.
In addition, if you filed on time but didn't pay on time, you'll generally have to pay a late payment penalty of one-half of one percent of the tax owed for each month, or part of a month, that the tax remains unpaid after the due date, not exceeding 25 percent. However, you will not have to pay the penalty if you can show reasonable cause for the failure. The one-half of one percent rate increases to one percent if the tax remains unpaid after several bills have been sent to you and the IRS issues a notice of intent to levy.
Beginning January 1, 2000, if you filed a timely return and are paying your tax pursuant to an installment agreement, the penalty is one-quarter of one percent for each month, or part of a month, that the installment agreement is in effect.
If you did not file on time and owe tax, you may owe an additional penalty for failure to file unless you can show reasonable cause. The combined penalty is 5 percent (4.5% late filing, 0.5% late payment) for each month, or part of a month, that your return was late, up to 25%. The late filing penalty applies to the net amount due, which is the tax shown on your return and any additional tax found to be due, as reduced by any credits for withholding and estimated tax and any timely payments made with the return. After five months, if you still have not paid, the 0.5% failure-to-pay penalty continues to run, up to 25%, until the tax is paid. Thus, the total penalty for failure to file and pay can be 47.5% (22.5% late filing, 25% late payment) of the tax owed. Also, if your return was over 60 days late, the minimum failure-to-file penalty is the smaller of $100 or 100% of the tax required to be shown on the return.
Also, refer to Tax Topic 653, IRS Notices and Bills and Penalty and Interest Charges.
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I received an IRS bill for an amended return I filed. I am not able to pay the whole amount at this time. Will the IRS allow me to make monthly payments?
If you cannot pay the full amount due, you may ask to make monthly installment payments. You may be charged a fee for this arrangement. Penalties and interest will continue to accrue on the unpaid amount until the account balance is paid in full. Refer to Tax Topic 202, What to Do if You Can't Pay Your Tax, for more information.
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