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If you can’t pay all the tax money you owe the federal government this year, the Internal Revenue Service has some options for paying over time. Most important, however, is that you file your return by the April 15 deadline.
The new tax law has led to an increase in Americans owing money as well as receiving lower-than-expected refunds.
If you know you owe money and are unable to pay in full, you can set up a payment plan even before you file your tax return. Here are some payment options.
1. Online payment agreement If as an individual taxpayer, you owe $50,000 or less in combined income tax, penalties and interest, or you are a business owner who owes $25,000 or less in payroll tax and have filed all your returns, you may qualify for an online payment agreement. You can set up this agreement to pay in under 120 days with no fee. If you need more time, you can take up to six years, but you will have to pay a $31 fee to set up the plan and must pay by automatic withdrawal. The interest rate is adjusted every calendar quarter and is based on market conditions.
If you don't have a payment plan, the late-payment penalty is .005 percent per month; if you do, you'll pay half that (.0025 percent), according to an IRS spokesperson.
Last month the IRS decided to waive penalties for those who underpaid taxes during 2018 if they've paid at least 80 percent of what they owe for that year. In the past you could avoid the penalty if you paid 90 percent of what you owed for the year.
“The IRS understands there were many changes that affected people last year, and the new penalty waiver will help taxpayers who inadvertently had too little tax withheld,” IRS Commissioner Chuck Rettig said.