Tuesday, March 17, 2009

Six Ways to Fund IRS Payments

From CNBC.com:

If you're like millions of other small-business owners across the country, your business has practically fallen off a cliff in the past few months.

For some owners, there's even more bad news. A decline in business means that revenue you were relying on to fund a payment to the Internal Revenue Service April 15 won't be there when you need it.

The good news is that if you find yourself in that nail-biting situation, you may have at least six ways to free up money to pay the IRS.

1. 'Borrow' from the government

"You can ask the IRS for a payment plan," says Buz Aaron, CPA, senior tax manager at Braver PC in Newton, Mass., "and the government will allow you to apply for, in effect, a loan from it."

There is, of course, a downside to borrowing from the IRS. "Interest rates on IRS installment loans range from 7 (percent) to 12 percent," says Michael T. Hanley, CPA, managing partner at Merl & Hanley LLP in Smithtown, N.Y. "It varies based on the prime rate." You'll also have to pay a "user fee" that ranges from $43 to $105 depending on your financial condition.

There's also a process you must follow. "A lot of people say, 'I can't pay what I owe, so I'm not going to file my tax return,'" Hanley explains. "But the best option is to let the IRS know you can't pay. If you do that, the IRS will make a lot of concessions. A lot of times they'll stop assessing penalties from the day you've filed for the payment plan. Or maybe they'll fix the interest rate. So the best course is to be up front and work with the IRS."

If you owe $25,000 or less, you can request a payment plan online at IRS.gov through Form 9464, called an Online Payment Agreement. If you owe more than $25,000, you must print, complete and mail forms 9465 and 433-F.

"Because of tight credit, there are going to be a lot more business owners who'll be taking advantage of IRS payment plans than in the past," Aaron says. "It's easy credit because you don't have go through a credit check. You simply have to fill out a form."

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