What If I Owe the IRS?

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Filing your federal tax return with the Internal Revenue Service each year is an especially unpleasant task if you end up owing tax. This can occur if you had too little withheld from your paycheck, made estimated payments that were too low or earned income from investments that you didn't have taxes withheld from at the time. Whatever the case, you can make the process easier and save money by paying what you owe the IRS as soon as possible.

Determining What You Owe

One of the major functions of your federal tax return is to compute your total tax liability and compare it to the amount you paid in estimated payments or paycheck withholdings. The last few lines of your return will ask you to subtract your payments from your tax. If the result is a negative number, it means the IRS owes you money and you can file to receive a refund. If the result is positive, it represents how much you owe. Tax form instructions make this clear and include directions for submitting a payment by the federal income tax due date in mid-April.

Submitting Payment

Upon completing your tax return, you'll find instructions for submitting payment. If you file electronically your tax software will allow you to enter a bank account number for an automatic debit. It may also provide a mailing address for sending a personal check or money order as payment. If you file a paper return, you may still submit payment through the IRS website as an electronic debit, or you can mail a check with your completed return. The mailing address for tax returns that include a payment is different from the address for returns that request a refund, so make sure you have the correct address so that your payment can be processed quickly.

Requesting an Extension

If you find that you owe more tax than you can comfortably afford to pay, you can request an extension of your tax due date. Most standard tax forms and online tax preparation programs include this option, which generally allows you to submit your return without any payment and await word from the IRS. You won't be relieved of your tax liability, and in fact the amount you owe will rise as the IRS adds interest to your tax to account for its lateness. However, an extension can keep you in compliance with the tax code if you have cash-flow issues or need time to raise the money you owe.

Other Payment Options

The IRS makes provisions for taxpayers who can't afford to pay the tax they owe even within the allotted extension period. In these cases, the IRS encourages taxpayers to submit as large a payment as possible with the completed tax return and await a bill for the remainder of the amount owed. The bill includes contact information that the taxpayer can use to enter into an installment plan or a less expensive 60- or 120-day repayment plan. Each option adds interest and fees to the cost of taxes, but shorter-term repayment still results in a lower cost than longer-term repayment.