IRS
Offers Several Tax Payment Options
WASHINGTON — The Internal Revenue Service today reminded taxpayers to
file their tax returns by the April 17 deadline and to pay as much as they
can of any taxes they owe to minimize any accrued penalties and interest.
There are also alternative payment options to consider:
- Request an Extension of Time to Pay — Based on the
circumstances, a taxpayer could qualify for an extension of time to pay.
The IRS is willing to allow extensions of time to pay in order to assist
in tax debt repayment. A taxpayer can request an extension from 30 to
120 days depending on the specific situation. Taxpayers qualifying for
an extension of time to pay of 30 to 120 days generally will pay less in
penalties and interest than if the debt were repaid through an
installment agreement. Taxpayers can request an extension of time to pay
using the Online Payment Agreement option available on the IRS’s Web
site at IRS.gov.
- Apply for an Installment Agreement — The IRS may
allow taxpayers to pay any remaining balance in monthly installments
through an installment agreement. Taxpayers who owe $25,000 or less may
apply for a payment plan electronically, using the Online Payment
Agreement application. Alternatively, taxpayers may attach a Form 9465,
Installment Agreement Request, to the front of their tax return.
Taxpayers must show the amount of their proposed monthly payment and the
date they wish to make their payment each month. The IRS charges a $105
fee for setting up an installment agreement. The fee is reduced to $52
for those who establish a direct debit installment agreement and $43 for
those with an income below a certain level (for more information, see
Form 13844). Taxpayers are required to pay interest plus a late payment
penalty on the unpaid taxes for each month or part of a month, after the
due date that the tax is not paid. A taxpayer who does not file the
return by the due date — including extensions — may have to pay a
failure-to-file penalty.
- Pay by Credit Card — Taxpayers can charge taxes on
their American Express, MasterCard, Visa or Discover cards. To pay by
credit card, taxpayers should contact one of the service providers at
its telephone number or Web site listed below and follow the
instructions. The service providers charge a convenience fee based on
the amount of tax the taxpayer is paying. Taxpayers should not add the
convenience fee to their tax payment.
2007 Inflation Adjustments Widen
Tax Brackets, Expand Tax Benefits
WASHINGTON — Personal exemptions and standard deductions will rise, tax
brackets will widen and income limits for IRAs will increase in 2007, thanks
to inflation adjustments announced today by the Internal Revenue Service.
By law, the dollar amounts for a variety of tax provisions must be
revised each year to keep pace with inflation. As a result, more than three
dozen tax benefits, affecting virtually every taxpayer, are being adjusted
for 2007. Key changes affecting 2007 returns, filed by most taxpayers in
early 2008, include the following:
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The value of each personal and dependency exemption, available to
most taxpayers, will be $3,400, up $100 from 2006.
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The new standard deduction will be $10,700 for married couples
filing a joint return (up $400), $5,350 for singles and married
individuals filing separately (up $200) and $7,850 for heads of
household (up $300). Nearly two out of three taxpayers take the standard
deduction, rather than itemizing deductions, such as mortgage interest,
charitable contributions and state and local taxes.
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Tax-bracket thresholds will increase for each filing status. For a
married couple filing a joint return, for example, the taxable-income
threshold separating the 15-percent bracket from the 25-percent bracket
will be $63,700, up from $61,300 in 2006.
In 2007, for the first time, inflation adjustments will raise the income
limits that apply to the retirement savings contributions credit,
contributions to a Roth IRA and deductible contributions to a traditional
IRA where the taxpayer or the taxpayer’s spouse is covered by a retirement
plan at work.
Revenue Procedure 2006-53, containing a complete rundown of inflation
adjustments, is posted on the IRS Web site and will appear in Internal
Revenue Bulletin 2006-48, dated Nov. 27, 2006.
IRS
Announces 2007 Standard Mileage Rates
IR-2006-168, Nov. 1, 2006
WASHINGTON — The
Internal Revenue Service today issued the 2007 optional standard mileage
rates used to calculate the deductible costs of operating an automobile for
business, charitable, medical or moving purposes.
Beginning Jan. 1,
2007, the standard mileage rates for the use of a car (including vans,
pickups or panel trucks) will be:
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48.5 cents per
mile for business miles driven;
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20 cents per
mile driven for medical or moving purposes; and
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14 cents per
mile driven in service to a charitable organization.
The new rate for
business miles compares to a rate of 44.5 cents per mile for 2006. The new
rate for medical and moving purposes compares to 18 cents in 2006. The
primary reasons for the higher rates were higher prices for vehicles and
fuel during the year ending in October.
Issue Number: IR-2006-163
IRS Formalizes Appeals Arbitration Process
The permanent arbitration procedure may be used to
resolve issues while a case is in Appeals, after settlement discussions are
unsuccessful and, generally, when all other issues are resolved except
specific factual issues for which arbitration is being requested.
Arbitration is not available for all issues. Some
examples include legal issues, issues already in any court, issues in a
taxpayer’s case designated for litigation, collection cases with certain
exceptions, and frivolous issues.
Revenue Procedure 2006-44,
which formalizes the arbitration process, is attached.
IRS Announces
Online Payment Agreement Application
WASHINGTON — Many individuals who owe delinquent
federal income taxes will now be able to apply online for a payment
agreement, the IRS announced today. The Online Payment Agreement (OPA)
application, now available on IRS.gov, provides an easy way to voluntarily
resolve tax liabilities.
Three payment options are available when applying
online:
- Pay in full. Taxpayers who pay within 10 days
save interest and penalties.
- Short-term extension. Receive a short-term
extension of up to 120 days. No fee is charged, but additional penalties
and interest will accrue.
- Monthly payment plan. A $43 user fee will be
added to the amount owed, and interest and penalty will continue to
accrue on the unpaid balance.
To access the application go to IRS.gov, use the
pull-down menu under “I need to...” and select “Set Up a Payment Plan.” The
application is available Monday through Friday from 6 a.m. to 12:30 a.m.,
Saturday from 6 a.m. to 10 p.m. and Sunday from 4 p.m. to midnight (all are
Eastern Time).
Related Items:
H.R. 4297, the Tax Increase Prevention and
Reconciliation Act of 2005
Two-Year Extension of Reduced Rates on
Capital Gains and Dividends
Under current law,
capital gains and dividend income are taxed at a maximum rate of 15-percent
rate through 2008. For taxpayers in the 10- and 15-percent tax brackets, the
tax rate is 5 percent through 2007 and zero in 2008. The Conference Report
extends the rates effective in 2008 through 2010. Without action, these
rates would have increased after 2008.
Extension and Modification of Certain
Provisions
1. Two-Year Extension of Enhanced
Section 179 Expensing for Small Business
Under current
law, small businesses may expense (i.e., deduct in the first year) up to
$100,000 of investments in depreciable assets. The deduction phases out
dollar-for dollar to the extent the business’s annual investments exceed
$400,000. Without action, the expensing limit would have declined to $25,000
and the phase-out threshold would have declined to $200,000 after 2007.
IR-2006-028
February 14, 2006
IRS
Updates Tax Gap Estimates
Since
2001, the IRS increased its enforcement revenues by nearly 40 percent from
$33.8 billion in 2001 to $47.3 billion in 2005. Audits of high-income
taxpayers — those earning $100,000 or more — topped 221,000 in fiscal year
2005, the highest number in the past 10 years.
Total audits of all taxpayers topped 1.2 million last year —a 20
percent jump from the prior year.
