Posted on: 14 March 2017
For many people, tax time is an exciting time where they hopefully get some money back in the form of a tax return. However, that doesn't happen for everyone. If you find yourself owing more money that you can pay right now to the IRS, here are four things that you can do to manage the situation.
#1 File Your Taxes On Time
The most important thing you can do is file your tax return papers on time. Don't avoid doing your taxes just because you owe money. Prepare your taxes so that you know how much money you owe, and file your paperwork on time. Failing to file your paperwork and failing to pay the taxes that you owe will add up and cost you big time.
#2 Pay What You Can
If you have a tax bill of $3,000 and can only pay half before the tax deadline, then pay the $1,500 that you can when you file your taxes or before the tax deadline. Paying as much as you can will help to reduce the late payment penalty that you are going to face as well as the interest charges that you are going to face due to not making the full payment as well. It is better to pay off a portion of your taxes if you are able to than to avoid paying the bill at all.
#3 Get A Loan
If you have a line of credit with your local bank, consider taking out a loan. The interest you would pay on the money to the bank is most likely going to be less than the late payment penalties and fees you will face if you fail to pay the IRS on time.
#4 Use Your Credit Card
If you have a credit card that you keep for emergencies, consider this an emergency. Use your credit card to pay off your tax balance to the IRS. Just make sure that you set yourself up on a payment plan to pay off your balance as quickly as possible, so you don't put yourself further in debt. Paying off your balance, as long as you can make a plan to pay your bill off over the course of the next year, is a great way to avoid interest and penalties from the IRS.
#5 Set Up A Payment Agreement
Finally, you can try to set up a payment agreement with the IRS. When you file online, you will have to fill out a specific form in order to set up payments. You can even set up a direct debit payment arrangements so that your payments to the IRS come out of your bank account on a monthly basis. Taking the time to come up with a payment arrangement will let the IRS know that you plan on paying back the money so that they don't take further collection steps against you and can help reduce or eliminate fines and penalties depending on the repayment terms that you arrange with the IRS.
The bottom line is that even if you can't pay the full amount, you should figure out a way to pay as much as you can and make a plan to pay the rest of your balance right away.Share