Sam Brotman, JD, LLM, MBA December 16, 2013 4 min read

How to Pay Your Taxes

How to Pay Your Taxes in Full

Unlike Chapter 7 bankruptcy, chapter 13 bankruptcy requires the taxpayer to pay all debts in full over a three-year to five-year period. With chapter 7 bankruptcy, most debts are cancelled and you must surrender some property to the bankruptcy trustee to pay creditors. However, with chapter 13, you end up paying most if not all of your debts over time. That’s why chapter 13 bankruptcy is considered the reorganization bankruptcy.

In a chapter 13 bankruptcy, filers must develop a repayment plan, the length of which is determined by how much the taxpayer earns and how much he or she owes. “Your Chapter 13 plan must pay certain debts in full. These debts are called ‘priority debts,’ because [they are] considered sufficiently important to jump to the head of the bankruptcy repayment line. Priority debts include child support and alimony, wages you owe to employees, and certain tax obligations” (Nolo.com, “An Overview of Chapter 13 Bankruptcy,” 8/17/2013). In cases where the filer loses employment or cannot keep up payments, the bankruptcy (court) will modify the plan or allow the taxpayer discharge some debts on the basis of hardship.

How to Request an Extension to Pay Your Taxes

Requesting an extension to pay your taxes involves multiple options. For one, taxpayers can utilize the option of requesting an automatic extension to file their individual income tax return. They can do this by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Tax Return. Taxpayers can also request an extension if they “can pay all or part of [their] estimate of income tax due using a credit or debit card or by using the Electronic Federal Tax Payment System (EFTPS)” (IRS.gov, “Topic 304 – Extensions of Time to File Your Tax Return,” 9/12/2013). Taxpayers can also request an extension to pay federal taxes filing a paper Form 4868 by mail.

In addition, taxpayers can request an automatic extension consideration by paying a part of their estimate of income tax due using a credit card or debit card or by using EFTPS. Taxpayers can pay by phone or by Internet. It is important to remember that an extension of time to file is not the same thing as an extension of time to pay your income taxes.

These are the options for requesting an extension to file and are not specific to requesting an extension to pay your taxes. The IRS gives you the option of requesting an extension to pay your federal taxes. “Based upon your circumstances, you may be granted a short additional time to pay your tax in full. A brief additional amount of time to pay can be requested through the Online Payment Agreement application” (IRS.gov, Three Ways to Pay Your Federal Income Tax, IRS Tax Tip 2011-68,” 9/12/2013). Taxpayers may receive an additional 60 to 120 days of extended time to pay their taxes in full. In using this option, taxpayers will usually “pay less in penalties and interest than if the debt where repaid through an installment agreement over a greater period of time” (“Three Ways to Pay Your Federal Income Tax”). Taxpayer should expect additional charges and penalties where apply.

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Sam Brotman, JD, LLM, MBA

Owner and Director of Legal
Brotman Law

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