If the IRS sends you a tax bill instead of a refund check don’t panic, there are several ways to manage this and it does not have to be a nightmare for your personal finances.

Sometimes people pay fewer taxes during the year than they are supposed to and that is why the IRS comes back with a bill, but don’t panic. A bill from the IRS does not have to be scary. You just have to manage it like any other part of your finances. Taxpayers have several options. Consider the following:

-You can pay the taxes with a credit card. According to credit card experts such as Cardhub.com, in the current credit environment people with a higher than average credit score could get a credit card with 0% interest rate for more than a year and hundreds of dollars in rewards if they pick the right card.

-It is also possible to call the IRS and establish a payment plan that allows you to pay the tax bill over a period of time up to 6 years. However, the IRS will charge an annual 3% rate for financing the debt. Though 3% is a low rate, it is not better than the 0% deal you can get with a good reward credit card if you have a great credit score and can get approved for one.

-Getting a reward card can be a strategic move for your finances. A reward card is not the usual credit card most people have in their wallets. A reward card can become a cash generator for you if you manage to use it the right way.

-After paying the tax bill with the card, focus only on paying the balance as fast as possible or within the 0% introductory period the card provides. That way you won’t pay any financing charges.

-Once the tax bill is paid and you have a credit card ready to use for other expenses, change your behavior and whatever you spend during the month pay it in full at the end of each period. That way you won’t pay finance charges and you will also accumulate miles or rewards. You can use the rewards in many ways such as purchasing from your favorite stores or to pay for airline tickets or hotels.

-Credit Cards with rewards can generate more benefits than costs.

If you don’t have the credit score to get a reward card ,the best way to pay the tax bill is by establishing a payment plan with the IRS. You just have to wait until you get the bill in the mail and call the IRS to negotiate a monthly payment. The IRS is quite flexible as they want you to pay. You may have to pay a fee to establish the plan and start paying the next month.

Fortunately, you’re not alone. This is a scenario that affects many people and the IRS understands that sometimes reality interferes with your ability to pay. There are options available to you if you are unable to pay and many are quite reasonable. We’ll go through some of the best options if you can’t pay.

Installment Agreement

The IRS offers installment plans that can help you break up what you owe into more manageable payments over time. You can apply online if owe less than $50,000 in combined taxes, penalties, and interest. You specify how much you can pay, how often you can make payments, and specify all that on an application. The IRS will now allow up to 6 years to pay your tax liability if you’re on an installment agreement.  There’s an application fee involved and the interest is manageable (especially since rates are low right now) but the IRS still has to approve your application. Not everyone is approved for this.

The whole process can be completed fairly quickly if you have your Caller ID number (from the top of your tax due notice), adjusted gross income, bank address, and employer address. You will have to pay the aforementioned loan fee, and pay interest, but it’s generally much less than what you would pay if you charged your tax bill to a credit card. Even if you end up with the highest fee schedule and interest, it’ll be much less than most credit card companies, so it’s a better choice than paying with plastic.

If you’re seriously considering this, the fees are $52 for a direct debit agreement ($105 for the standard agreement or payroll deduction). It can be reduced to $43 based on income, that’s the cheapest option. It’s worth noting that many states also have installment payment options that you can take advantage of. Check with your state comptroller’s office, or tax division, and you can find out more about your options.

Request “Additional Time To Pay”

In same cases, if you can describe your situation, and if you are able to pay within 60 to 120 days, you might be able to get a little more time to make your tax payment. Call 800.829.1040 to speak to someone about this option or apply through the Online Payment Agreement application. If you can pay your tax in full within a relatively short period of time, there is a chance that you can pay less in interest and penalties.

Do not confuse this option with an “extension,” which is simply a request for additional time to file your return. Those who request an extension still have to pay any tax liability on tax day, they don’t get additional time to pay their taxes.

Offer in Compromise

You can actually offer to settle your tax obligation with the IRS by paying a percentage of what you owe. If you are having trouble paying due to income or other problems, the IRS might accept an Offer in Compromise.  The IRS usually only accepts if the offer is reasonable – and if the likelihood of collecting the whole amount in a “reasonable” period of time is rather slim.

The IRS is more flexible than you might think, as long as you are willing to meet your obligation, and can show that you need the help. Contact the IRS to work out an arrangement that makes paying your taxes a little more manageable.

If you have questions, don’t forget TurboTax has CPAs, IRS enrolled agents, and tax attorneys available to answer your questions year round.

Si el Servicio de Impuestos Internos (IRS) le envía una cuenta en vez de un cheque de devolución, no entre en pánico. Hay varias maneras de manejar esta situación y no es necesariamente una pesadilla para sus finanzas personales.

Algunas veces las personas pagan menos impuestos durante el año de lo que deberían y esa es la razón por la cual llega una cuenta de cobro del IRS. Una cuenta de cobro del IRS no tiene porque asustar. Usted solo tiene que manejar ese asunto como cualquier otro en sus finanzas. Los contribuyentes tienen varias opciones. Tenga en cuenta lo siguiente:

-Usted puede pagar sus impuestos con tarjeta de crédito: De acuerdo con expertos en tarjetas de crédito como Cardhub.com, en el ambiente de crédito actual, las personas con calificación de crédito superior al promedio podrían obtener una tarjeta de crédito con una tasa de interés de 0% durante más de un año y cientos de dólares en premios si seleccionan la tarjeta correcta.

-También es posible llamar al IRS y establecer un plan de pago que le permita pagar la cuenta de impuestos durante un periodo de hasta 6 años. Sin embargo, el IRS le cobrará una tasa de interés anual del 3% por financiar la deuda. Aunque 3% es una tasa baja, no es mejor que la tasa de 0% que puede tener con una tarjeta reward o de premios si es que usted tiene la calificación de crédito que le permita obtener una.

-Obtener una tarjeta de premios puede ser una decisión estratégica para sus finanzas. Una tarjeta de premios (reward card) no es la tarjeta normal que la mayoría de la gente lleva en su billetera. Una tarjeta de premios puede convertirse en un generador de efectivo para usted si la maneja de la manera correcta.

-Después de pagar la cuenta de impuestos con la tarjeta de crédito, enfóquese solo en pagar el saldo de la deuda lo más rápido que pueda o dentro del tiempo de introducción en el que la tasa de interés es de 0%. De esta forma usted no pagará ningún costo de financiación.

-Una vez su cuenta de impuestos está pagada y usted tiene una tarjeta de crédito lista para usar e otros gastos, cambie su comportamiento y todo lo que gaste en el mes, páguelo por completo al final de cada periodo. De esta forma usted no pagará costos financieros y además acumulará premios en forma de millas o puntos. Usted pude usar esos premios para comprar sus productos favoritos o para viajes y hoteles.

-Las tarjetas de crédito con premios (reward card) pueden generar más beneficios que costos.

Si usted no tiene la calificación d crédito para obtener una tarjeta de crédito de premios, la mejor forma de pagar su deuda con e IRS es estableciendo un plan de pago. Solo tiene que esperar hasta que llegue por correo la cuenta de cobro del IRS y llamar al IRS para negociar su forma de pago mensual. El IRS es flexible porque lo que quiere es que los contribuyentes paguen. Seguramente tendrá que pagar un costo para establecer el plan de pago y empezar a pagar al mes siguiente.

Fresh Start Initiative

In recognition of the challenging times many people continue to face due to the lackluster economic recovery, the Fresh Start Initiative (FSI) provides some people with a little breathing room.

The Fresh Start Initiative changed four components to help struggling taxpayers:

• Tax Liens
• Installment Payments
• Offers in Compromise
• Penalties

1. Tax Liens

The Fresh Start Initiative increases the Notice of Federal Tax Lien filing threshold from $5,000 to $10,000.  Although the IRS might still choose to file a tax lien notice at a level less than $10,000, doing so is less automatic.  In addition, the Fresh Start Initiative makes it somewhat simpler to have a lien withdrawn after payment.  You can use Form 12277, Application for Withdrawal to request the lien withdrawal once you have filed all of your tax returns and paid all of your back and current taxes.

2. Installment Agreements

Like with Tax Liens, the Fresh Start Initiative’s provisions raised thresholds on balances due and the time given to pay tax liability.   Specifically, the maximum total for streamlined installment agreements has been doubled by FSI from $25,000 to $50,000. Furthermore, the length of time you have to pay back the taxes you owe has increased from five years to six years.  To start the Installment Agreement process, read the Instructions for Form 9465. Then, complete Form 9465, Installment Agreement Request.

3. Offers-in-Compromise

The Fresh Start Initiative also provides for a streamlined Offer-in-Compromise process.  An Offer-in-Compromise is IRS-speak for the IRS acceptance, as full payment of your back taxes, some amount less than the full amount owed.  To determine if you’ll qualify, you’ll need to complete Form 656-B, Offer in Compromise Booklet.

The streamlined nature provided by the Fresh Start Initiative enables you to share less financial data and, generally speaking, provides you with more flexibility as it considers your ability to pay your tax liability.

4.  Failure to Pay Penalties

If you are even a day late paying your income taxes, you are ordinarily subject to interest charges and penalties based on the amount of your payment shortfall. However, the Fresh Start Initiative allows you to delay paying your 2011 taxes due by April 17, 2012 until October 15, 2012 – without being subject to any failure-to-pay penalties.  Interest will still be charged, however.

Taken together, these four benefits of the Fresh Start Initiative can be valuable in landing you back on your feet. If you’re behind on your taxes, consider taking advantage – the Fresh Start Initiative presents not only a great opportunity to get your finances back in order but also lets you sleep better at night.

The Impact of the Fresh Start Initiative on Lien Creation

Arguably the most important component of the FSI is the changes to the IRS policy concerning liens.  (A tax lien—which represents the right to keep current or future property until a taxpayer’s debt is satisfied—can be placed by the IRS on property if  significant back taxes are owed.)  Historically, liens were often placed if back taxes owed exceeded $5,000.  Now, the dollar threshold has doubled to $10,000.  The reason why liens are so important is they can dramatically effect the credit of a delinquent taxpayer. If a Notice of Federal Tax Lien is filed, a notice that establishes IRS priority position against other creditors is provided to all the taxpayer’s creditors.  Needless to say, one who has poor credit is likely to incur further financial issues, making it that much harder for them to pay back the taxes owed.

Lien Withdrawl

The eventual release of a lien is, of course, critical—and the quicker it is withdrawn, the better.  There are two important changes to the lien withdrawal process. The first, according to the IRS, is that, “Liens will now be withdrawn once full payment of taxes is made if the taxpayer requests it. The IRS has determined that this approach is in the best interest of the government.”  I’d add, it’s also in the best interest of the taxpayers.

Secondly, certain taxpayers who enter into Direct Debit Installment Agreements may  have their liens released.  Among the key conditions required to qualify, is the current amount you owe must be paid down to $25,000 or less.  Furthermore, you must agree to fully pay the amount owed within a maximum of five years (possibly earlier in certain situations).  You must also successfully make three consecutive direct debit payments and not have defaulted on any previous debit installment agreements to qualify.

Installment Agreements and Small Businesses

Installment agreements are obligations to pay the taxes owed over a period of time.  Prior to the Fresh Start Initiative, small businesses would only qualify for an installment agreement if they owed less than $10,000.  Now businesses owing as much as $25,000 can qualify.  Enterprises, regardless of whether they file as an individual or business, can have up to 24 months to repay the debt.

Streamlined Offer in Compromise Process

The Fresh Start Initiative also offers a new Streamlined Offer in Compromise program.  An Offer in Compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the amount owed.  The offer is not accepted by the IRS until they decide whether or not a taxpayer has the ability to pay based on the review of their assets and liabilities.  The new streamlined program minimizes the amount of financial information requests, requests information via personal calls, and has a quicker turnaround time in the decision process. Taxpayers with annual incomes up to $100,000 or less, and tax liability less than $50,000 when the offer is filed may be eligible.

No matter the amount you owe to the IRS, getting back on track will help you start to get your entire financial future in order. The recent Fresh Start Initiative presents tremendous opportunities to help you get back on track at the lowest possible cost and least amount of hassle.

For more information see IRS Announces New Effort to Help Struggling Taxpayers Get A Fresh Start

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