In the aftermath of the tax season, there are some of us that have taxes due to the IRS that were not paid on April 15th. Given the economy, in a lot of cases, people simply did not and still do not have the resources to pay their necessary living expenses, let alone unforeseen IRS debt that in most cases was not fully known until close to April 15th. By then, it was too late to address what went wrong and who is to blame. Unfortunately, a lot of us are tapped out on credit cards that might have been used to pay the balance, or that home equity line of credit that we came to depend on dissipated with the housing crash. If your credit rating took a dive, your bank or credit union probably considered you to be too high risk for even a signature loan unless you had collateral. Though we cannot personally pay your taxes for you, happily, we can offer solutions (now and over the next few weeks, so stay tuned) for a great majority of individuals that they can use to deal with their IRS debt.

I trust that you filed your return by April 15th to avoid the late filing penalty. Inevitably, you will be charged a late payment penalty of .05 percent on a monthly basis until your taxes are paid in full. Not only that, the unpaid balance will accrue interest. The current interest rate is 4%, compounded daily. Of course, how much interest and penalty you ultimately pay will be directly correlated with how long you need to pay the balance. What follows today and over the next few days are a series of scenarios and solutions depending on where you are currently seated financially. In the future, we will address in depth matters regarding balance due accounts.

Scenario 1: I owe a small balance (under $1000) to the IRS. I do not owe taxes currently and have never owed before. I could not pay in full on April 15th but I can pay in full by the end of May with a bonus that I am expecting. If this falls through, I can definitely pay the full amount at the end of June. What should I do?

Solution: For those that only need a few weeks to a few months to pay in full, consider an extension of time to pay. This option will allow you up to 120 days in which to pay your balance in full. The time commences as of the day that you make the call. You will not receive monthly reminders, only a verbal and in a few cases, a letter as your evidence of establishing the extension. It is your job to ensure that the full payment is made by the agreed upon date. If you do not receive a confirmation letter within 2 weeks, call and request one be sent for your records.

Though there is no user fee for this option since it is short term, applicable interest and penalty charges will accrue until your balance is paid in full. Rule of thumb: the lower your balance and the faster that you pay the taxes off, the lower your overall charges will be for interest and penalties.

In order to initiate this option, you are required to have filed your return and received a notice. You cannot have a current installment agreement on file with the Internal Revenue Service with respect to prior year taxes owed. When you receive your notice, contact the IRS at 1-800-829-0922 to initiate your request for fastest service or you may write to the address shown on the letter. Since it takes 30 days or more for a response, you may want to take care of this matter over the telephone.

It goes without saying that if you cannot pay in full as agreed by the due date, contact the IRS at the above number and let them know. Otherwise, you will get a letter in the mail requesting the remaining balance due, assuming payments were made. Failure to do so may result in your account being elevated to Collections. In this status, bank levies and paycheck levies have been known to occur. Don't let this happen to you!