There are only two certain things in life: death and taxes!
Tax time comes around every year without fail, and it’s a pretty stressful time for most of us. Between figuring out how much we owe, submitting the forms to the IRS, and making the payments on time, we’re all thrilled when tax time has finally come and gone.
But what happens if tax time rolls around and you find yourself short on what you owe the IRS? How can you avoid penalties if you just don’t have what you need to pay your taxes?
1. Dip into Savings
It may hurt, but it’s better than being hit with a serious fine for failing to pay your taxes. You may have to touch your retirement fund or your kids’ college funds, but PAY OFF THOSE TAXES!
2. File for an Extension
The IRS does allow you to file for an extension, giving you a bit more time to file your taxes. If the money is coming in or you nearly have what you need to pay it off, filing for this extension will give you a grace period to scrape together enough.
Find the form here
3. File the Taxes, Anyway
The IRS will fine you for failing to pay your taxes, but they’ll also fine you for failing to FILE the taxes in the first place. You don’t want to pay both fines, so make sure to go ahead and file your taxes even if you can’t pay them off. You’ll be penalized, but the penalty will be smaller than it would have been had you tried to avoid filing and paying.
If you can pay even SOME of what you owe, it’s better than not paying at all. File and make what payments you can, and look into the other options to figure out how to pay the rest.
4. Use Your Credit Card
It’s better to owe your bank or credit card company than the IRS. If you almost have what you need to pay off the taxes, put the rest on your credit card. Then you can sit down with your credit card provider and discuss an easy, low-interest way of paying off that debt without it ruining your credit score. If you default on your taxes with the IRS, it will automatically ruin your credit score!
5. Apply for an Installment Agreement
If you can’t pay what you owe, you can apply to pay off the taxes in monthly installments. The IRS will usually permit it, though it will affect your credit score—not to mention your monthly finances. As long as you owe less than $50,000 in taxes and penalties, it’s quick and easy to apply for this option.
Find more information here
6. Make an Offer in Compromise
If you owe a lot of money and have no way to pay it, you may be able to settle with the IRS to pay some, but not all, of the debt. There are some pretty strict requirements for you to be eligible for this option (cannot be filing for bankruptcy, have filed all the paperwork, etc.), but if you have a VERY valid reason why you can’t pay, the IRS may be willing to consider it. Note that up to 80 percent of OIC offers are rejected, but it’s still worth a try.