How To Pay Uncle
Q: What will the IRS do with my information once they know my bank account?
–E. Snowden, Moscow
A: Most of my clients use direct deposit when they have a refund; it’s the fastest and most efficient way to get the money due them. Now many of these same good folks shriek at the thought of direct charges to their account when they owe, because “I just don’t trust the IRS with my bank information.”
Let’s examine this: The bank information is the same whether money is coming in or out, right? In fact, if you write a check or pay online through EFTPS, well, that’s drawn on your account as well.
Concerned about abuse? I know of no instance of individual employees stealing bank account information from taxpayers. And believe, me it would be a monumental scandal. And the IRS cannot levy your bank accounts for back taxes without laborious due process.
For my clients, once your tax return is complete my software lets me schedule the charge to your bank account for any date not later than April 15.
Q: How does the installment plan work? Is it better than ours?
–Bill, Joe and Pete Hardi, BI-JO-PE
A: Probably not. Then again, the IRS is collecting money for the government and you are selling furniture in Southeastern New England.
If you owe the feds money and cannot pay it back in a few months they will want you to be on an installment plan. This fixes the amount you are expected to pay monthly, and you can spread the payments over several years (not recommended). You will want to pay off your debt as quickly as possible because interest and penalties accrue monthly and can easily exceed 10% per year. You can negotiate the details of the plan itself but interest and penalties are statutory.
The installment plan costs $120 to set up ($43 if you qualify as low-income.) It’s not worth doing if you are going to pay it off in a few months (and it takes the IRS a few months to set up anyway.) While it is not required, it will help you get on a clear track to repay your debt and get the monkey off your back; it also enables you to have your bank account debited monthly, Mr. Snowden. And the IRS will not be hounding you as long as you keep up with the plan.
And click here to read about late payment penalties and here to understand the hazards of underestimating your tax payments..
Q: Can I pay the IRS by credit card?
–J.P. Morgan, Financial District, NYC
A: You can but not through the IRS directly — you have to use a third party vendor and pay their fees.
Because You Asked Dept
Q: Does a Zen mensch go to synagogue?
–Buddha Burnstein, Brooklyn
A: Judaism is in my blood, and most of what I treasure about it is its ethical sensibilities. Buddhism is my practice — wisdom and compassion are its twin swords. I love Zen chanting and Hasidic revelry — they take me to the same place of mindful compassion. I go to Zen Center or synagogue to connect with my brethren/sisteren and when I need a reminder that I am not alone.
Because you asked… (and please, keep asking).
