If you're finishing up your 2011 tax return for the deadline on October 15, 2012, and you have a balance due to the Internal Revenue Service, you have several options for paying your remaining taxes.
You could pay some or all of the taxes due with a check. Be sure to mail that in with your return or using the 1040-V payment voucher if you are filing electronically. Be sure to mail your payment to the right address at the IRS, as the IRS has slightly different addresses for payments.
You can also pay your federal taxes using a credit or debit card. These payments are processed by third-party payment processors who charge a convenience fee ranging from 1.89% to 2.35% for credit card payments and from $3.49 to $3.95 for debit card payments.
You can also set up an installment agreement with the IRS. The IRS charges a one-time user fee to set up the payment plan, ranging from $52 if payments will be automatically withdrawn from your bank account to $105 if payments will be mailed in. You can set up the installment agreement by adding Form 9465 or Form 9465-FS to your tax return and filing it with the rest of your return. If you already have an installment agreement plan in effect, you'll need to call the IRS to request that your 2011 balance be added to your existing plan. You can also set up an installment agreement after your tax return has been filed by accessing the Online Payment Agreement application on the IRS.gov Web site.
The IRS routines approves installment agreements under their streamlined procedures if the outstanding balance is $25,000 or less and the balance will be paid off in 60 months or less. The IRS recently expanded their streamlined criteria as part of their Fresh Start Initiative. Under this new program, taxpayers can set up a payment plan if the outstanding balance is $50,000 or less and the balance will be paid off in 72 months or less. To be considered under this program, taxpayers should request a payment plan using the new Form 9465-FS.
My best advice is to be sure to file your tax return no later than October 15, 2012. If you previously requested an extension, filing by October 15th will avoid a 5% per month penalty, based on your balance due, for filing your return late past the extended deadline.
And speaking of penalties, the IRS has indicated it may be willing to waive the half-a-percent per month penalty for late payment for taxpayers who became unemployed or suffered a 25% or more decrease in their self-employment income. This penalty waiver is also part of the IRS's Fresh Start program. Eligible taxpayers will need to pay their tax in full by October 15th and request a waiver using new Form 1127A.