According to the Internal Revenue Service (IRS), approximately three out of four taxpayers who file an annual tax return receive a refund. That's good news for 75% of consumers, but not ideal for the remaining 25% of taxpayers who find they owe money at tax time.
In fact, it's one reason why some Americans will drag their feet, and wait until the last minute to get their tax return filed.
If you are someone who has, or expects that you may have, a tax liability to pay, it's important to be aware of the rules regarding tax payments and to manage your time wisely in advance of the April 17 tax deadline.
Perhaps the most important thing to remember, and something that still surprises people when I remind them, is that while you can request a six month extension for filing a tax return, you still need to pay your taxes by April 17 in order to avoid interest and potential penalties. The additional six months (until October 15, 2012) may help some taxpayers breathe a sigh of relief, but more often than not it's better to buckle down and file by the deadline, even if it requires paying.
There are several ways to make payment on a tax liability. For those who wish to pay what they owe in full, they can send a check made payable to the United States Treasury, being sure to note the taxpayer's social security number or employer identification number, tax period, and related tax form number. If you want to pay with cash, that's an option, as well, though you must pay in person at a local IRS Office.
Some people prefer to work with the IRS to set up an installment plan and pay down their tax debt each month in a predetermined amount based on the amount owed. However, there is a one-time fee charged by the IRS for this arrangement (at present, $52 for direct debit agreements and $105 for non-direct debit agreements). Similar to most installment payment plans, you will be charged interest on the unpaid amount of the debt, as well as potential penalties. You will also be expected to repay the full debt amount within 72 months.
Another option for paying a tax burden is to pay by credit or debit card through an IRS e-pay service provider. This can be done via phone or electronically, though consumers should be aware that there is a fee charged by service providers to facilitate the transaction.
Keep in mind that you can file your return at any time and wait until April 17 to pay, if desired. If no effort is made to pay, you could be subject to collection action, such as having your wages, bank accounts or other assets garnished. The bottom line is, plan ahead to find out if you owe, and to determine the best way for you to pay Uncle Sam based on your current financial situation.
Follow Mark Steber on Twitter: www.twitter.com/marksteber