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January 10, 2008

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being able to pay by credit card is a huge benefit in HK where taxes are paid in two installments (there is no month to month deduction from salary here).

I could be wrong, but I recall that you have to pay the credit card service fee if you choose to pay that way.

I'd strongly suggest that credit card debt collectors calling you up would be preferable to jail for tax evasion. Certainly paying by credit card is probably one of the last options you should take (apart from cashing out your retirement plan?) but if you haven't got the money you owe them, you'll have to pay them somehow.

I disagree with every one of the recommendations in the Yahoo article. For those that are serious about finances, the best way to pay a large tax bill, and the only way to effectively deal with tax-related matters at all, is through PLANNING.

If you're serious about finances, then taxes are a year-round affair, and not a March-thru-April affair. When you foresee a large tax bill on the horizon, due in mid-April, then the funds to meet this obligation need to be pro-rated and set aside for each of the twelve months in advance of the due date.

This is exactly what an employer is required to do with respect to employee withholding taxes -- why should you be any less diligent than the tax collector?

Friends who have dealt with tax bills all agree that it is better to pay with a credit card, and then deal with a credit card company, then to have to deal with the IRS on a regular basis. They all said it was very hard to get information from the IRS if something wasn't sent via mail, or if something wasn't received by the IRS. At least the credit card companies have some customer service!

"Certainly paying by credit card is probably one of the last options you should take (apart from cashing out your retirement plan?) "
What if you have the money and just want cashback? I never get to have high AmEx cashback rate because I don't spend enough. Add taxes this year (capital gains on some ESPP stock that I sold on December 31st that might trigger AMT), and I might just get it. Not to mention 5% I get on my high yield savings before I get the credit card bill.

If you don't have the money, credit card would still be preferable to uncle Sam. No jail, they cannot take your home away, and if you get 0% offer, you could spread the payment over a longer period. Assuming you actually repay it within short period of time and not just leave it there for years accumulating interest.

The credit card option does have a "convenience fee" associated with it, but like many have said, paying that is probably preferable to dealing with IRS interest and penalties and overall bureaucracy.

As a CPA, I have never heard of option 3 listed above. Of course, you can pay your taxes late - but expect to pay interest and penalties on top of the original tax. Extensions are only for time to file, not time to pay.

But like F. Morana said, planning is the best "payment method" if you're expecting a large tax bill.

What about the guy a couple years back who boarded himself up and refused to recognize IRS authority? I don't remember how that worked out for him, but it might be a fifth option to consider.

It may be more effective to enter into an installment agreement with the IRS than pay on a credit card. Once you enter into an installment agreement, you are back onto good terms with the IRS as long as you keep up on your payments. The interest you pay on these agreements is typically less than most credit cards as well, so if you were going to be carrying the balance on your credit card and paying interest, you will be better off using an installment agreement. If you don't qualify for an installment agreement, it is possible you will qualify for a partial payment installment agreement where you end up paying less than you would with a regular installment agreement.

One main difference is that the traditional IRA is tax deductible. This means that you can deduct all that you contribute to the fund during the year from your income while filing your taxes. The Roth IRA however is not deductible.

The most sickening thing about this is that the IRS can mistakenly reward you with a HUGE tax bill, and if your tax professionals don't respond properly in a very short time, they can torment you with this erroneous tax until you are destroyed and cannot even use plastic anymore.

It is now more than 10 years since the tornado hit us causing the losses which the auditor just "disallowed" and the appeals papers were not sent to request a docketed tax court date but were sent somewhere else and then just "Lost".

Everyone involved gets to escape but the taxed citizen.

If you think you do NOT owe the money they say you owe, You need to find the book I found. The Taxpayers Ultimate Defense Manual.

Hope you get some help. We are still under attack but the last meeting with them, the price dropped $100,000.00 due to their admission they were not correct the first time around.

Its very painful to be correct and abusively under attack.
Our accountants and attorneys abandoned us to them. And they were wrong.

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