What Should You Do If You Can't Pay Your Taxes?
Posted on: 2 March 2016
If you didn't get your tax withholding right this year, you may be facing a huge tax bill. If you've completed your tax return and found you owe far more than what you have in your savings account, you may fear what will come next. Luckily, the IRS does not live up to its scary reputation. They will work with you as long as you work with them. Here's what to do.
File Your Tax Return On Time
File your tax return on time even if you can't make full payment on time. The penalty for not filing or filing late is much higher than filing on time and paying late.
In addition to costing you more money, filing late could potentially reduce your payment options later on. There's also no reason to delay filing your return until the deadline. Any late payment penalties or interest are calculated from April 15th, not from when you file.
Pay As Much as You Can
You do not have to pay your entire tax bill at once. In fact, you can make as many payments as you want to.
To reduce the amount of interest and late fees you will owe, pay as much as possible towards your tax bill by the April 15th deadline. Interest and penalties will only apply to what's unpaid after that.
Consider a 0% Credit Card Offer
If you can't pay your tax bill by April, but think you can comfortably do so within the next year, look for a 0% credit card offer. You can either sign up for a new card or take advantage of a balance transfer offer on an existing card.
By using the credit card to pay your tax bill on time, you'll avoid the late payment fees. Because you're using a 0% offer, you'll also avoid interest as long as you pay the credit card balance off before the end of the 0% interest rate.
Set up A Payment Plan With the IRS
The IRS allows you to set up a payment plan with the filing of a simple form. It is expensive, but not as expensive as high interest rate loans and credit cards.
You will be charged a fee to set it up as well as late payment and interest fees until the tax debt is paid off. However, you will avoid being sent to collections for the tax debt.
To learn more about what to do if you can't pay your taxes, contact a local tax accountant or a company like Daisy Chu & Co. Inc. Taxes.
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