The caveat?
Make sure you pay it off within a few months to keep your costs down.
Payment Plans
Working out an installment agreement with the IRS is the second option, says Luscombe. If you owe $25,000 or less in taxes, interest and penalties, you can set up a
payment agreement online with the IRS. Or you can apply using
Form 9465.
A one-time fee applies when the IRS accepts your installment payment agreement -- usually $52 or $105. Interest is adjusted quarterly and varies with federal short-term rates. Luscombe says that taxpayers who owe more than $25,000 in taxes, interest and penalties may be able to set up an installment plan, but must also file
Form 433F ("Collection Information Statement") in addition to Form 9465.
Want to avoid the last-minute hassle next year? Start your tax paperwork early, if possible. And plan to lower next year's outstanding tax bill by adjusting your withholding and making estimated tax payments to keep IRS bills from snowballing, says Luscombe.
"[T]he IRS is one creditor that most people don't want to have," he says.
Suzanne Barlyn
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