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How to Pay Your Taxes

You may pay your tax liability in various ways. You may pay the IRS electronically or by sending a check or money order, made out to "United States Treasury". You may pay the full amount of your outstanding balance or any other amount you are able to pay. Be sure to include your social security number on your payment.

Consider financing the full payment of your tax liability through loans, such as a home equity loan from a financial institute or credit card. This is because your unpaid balance is subject to interest that is compounded daily and a monthly late payment penalty, so it is in your best interest to pay your tax liability in full as soon as you can to minimize the amount of interest and penalty charged. The interest rate a bank charges is usually lower than the combination of interest and penalties imposed by the Internal Revenue Code. Full payment will stop any further collection notices or other collection actions.

If you cannot pay in full immediately, the IRS offers short-term extensions of time to pay in full from 10 to 120 days.

Installment Agreements

If you cannot full pay your tax liability in a lump sum, the IRS offers a partial payment option. You may apply for an installment agreement. Installment agreements may be set up in various ways:

  • Direct debit from your bank account
  • Payroll deduction from your employer
  • Regular installment agreement

If you enter into an installment agreement, your payment amount should be based on your ability to pay and should be an amount that can be maintained over the lifetime of the installment agreement. Direct debit or payroll deduction installment agreements provide you with the opportunity to make timely payments automatically, and therefore, these payment methods reduce the possibility of defaulting your agreement.

Responding to Your IRS Notice

It is important not to ignore an IRS notice. If you do not make payments or other arrangements to pay the amount you owe in full, the IRS may file a Notice of Federal Tax Lien, and may take enforced collection action which could include serving a Notice of Levy or offset of a tax refund. Refer to IRS Topic 201 for information about "The Collection Process".

If you are unable to make any payment at this time, you may call the IRS at 1-800-829-1040.

If the IRS determines that you cannot pay any of your tax debt, it may temporarily delay collection until your financial condition improves. Be prepared to provide pertinent financial information from documents you should have available to you during the call, such as current pay stubs, rental agreements, or mortgage statements, and car lease/loan statements.

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Next Steps

Contact a qualified tax attorney to help you navigate your federal and/or state tax issues.

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