Most taxpayers probably think that asking the IRS for a loan is about as smart as going to a neighborhood loan shark. But, think again.
If you, or your kids, find yourself in the unenviable position of being unable to pay what owe with your 2003 return, using the government's installment plan might be the most economical solution.
First of all, if you don't have the cash to cover your bill, don't even think that simply not filing is a solution. There are tough penalties for failing to file.
Of course, you could charge what you owe to a credit card. But that can be expensive. Let's say you owe $10,000. One of the firms that handles credit card payments for the government will charge you a $250 "convenience fee" to do the deal. And if your card charges 19% interest, you'll pay about $2,100 in interest if you pay off that $10,000 over two years. The cost of paying with plastic: $2,350.
Now, consider setting up an installment plan with the IRS. You do that by filing form 9465. And you get to propose how much you can afford to pay each month. If you owe less than $25,000 and can pay it off in less than five years, approval of your plan is almost automatic.
The IRS charges $43 to set things up, and you'll pay interest and penalties, too. But get this: The IRS interest rate is now just 4% and it will rise to 5% for the quarter beginning April 1. Even with the 5% rate and the penalty, you'll basically be paying just 8% a year, assuming you file on time.
If you pay off a $10,000 tax debt over two years under the installment plan, it will cost about $900 -- a $1,450 savings over the credit card route.
If an installment plan is for you, file Form 9465 with your return. Within 30 days or so, you'll hear from the IRS on how to proceed.
GETTING STARTED
