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Can I Pay My Taxes in Payments?

This year, millions of Californians took advantage of the automatic six-month extension (+1) for filing their U.S. and state tax returns. Unfortunately for many, once the returns were calculated, the resulting tax bill was more than expected. While facing a larger-than-expected tax bill can be daunting, there are options available for paying your taxes in installment payments.

Why You Might Need a Payment Plan

Life is often unpredictable and challenges can arise unexpectedly. Many times, layoffs, surprise medical expenses, and other financial setbacks result in taxpayers finding themselves unable to pay their taxes in full. It could even be a happy surprise with income being higher than expected. With penalties and interest accruing daily, many taxpayers feel stressed to pay the full sum even if that is not possible. Due to the commonality of these issues, the IRS and FTB offer ways for taxpayers to settle their debts without unduly burdening their finances.

IRS Payment Plans

The IRS offers taxpayers several options to come into compliance with their tax debt through payment plans of various lengths. Taxpayers owing less than $100,000 in tax, penalties, and interest can apply for a short-term payment plan. Under the terms of the short-term plan, qualifying taxpayers can break up their repayment over a six-month period. For those owing $50,000 or less, long-term plans are also available; allowing qualified taxpayers to make repayments for up to six years. Both payment plans can be applied for online.

FTB Payment Plans

Like the IRS, the FTB allows certain taxpayers the ability to pay their tax debt over a period of time under certain circumstances. Most qualifying taxpayers can make payments over three to five years. To qualify, taxpayers must (1) owe the FTB less than $25,000, (2) certify that they can pay the amount within five years of approval, and (3) have filed all outstanding returns from the previous five years. Like with the IRS plans, taxpayers can apply online.

But What if I Owe More Than the Payment Plan Options?

Unfortunately, for taxpayers owing over $100,000 to the IRS or $25,000 to the FTB, the process is a bit more complicated and you can’t apply online. To apply, taxpayers must file formal requests for payment plans and provide financial reports to the IRS and FTB. Even with this process the IRS and FTB may still file liens against assets you own. This is where retaining trusted tax counsel can help. Your tax attorney can determine your eligibility for various repayment programs, prepare any forms or financial reports needed, and will work with the IRS and FTB to avoid liens in order to find a payment option that works best for you. If you are struggling to repay your tax bill, or have received a notice of an underpayment, contact Hone Maxwell LLP for assistance.

Disclaimer: Hone Maxwell LLP articles and blogs are not intended as legal advice. Additional facts, facts specific to your situation or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information herein.

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