Owe Taxes and Can Not Pay Tax Debt?
Do you have financial difficulties during these tough economic times? If so, then the last thing you need is to add the IRS to your list of headaches. So you've just prepared your taxes--or you have not started working on your tax return, but you know with certainty that you will have to pay taxes and that you cannot afford to pay the total amount due on time. Want to remove that constant stress hanging over your head? Luckily, the IRS has already taken measures to help taxpayers in your exact situation. Here are some tips for getting yourself in the clear:
Options to Pay for Taxes you Owe or Can't Pay Now
First of all, don't panic! Next, don't delay! Take a deep breath and try to figure out how much of your tax debt you can actually afford to pay now.
You should always file your tax return on time to minimize your tax penalties. Even if you can pay nothing, you should file on time to avoid a greater penalty. Likewise, you should always pay as much as you can in order to minimize penalties, because your penalties will be based on the amount you still owe. Learn more about tax penalties.
Even if you file a request for an automatic extension of time to file, this only extends the deadline for filing your return--not the deadline to pay any taxes you owe!
Ideas for Paying Tax Debts
If you have a balance due on your tax return, you may want to consider getting the money through other means. This is only a good idea if any interest you end up paying is less than the interest and penalties the IRS will charge you.
Whether you owe hundreds or thousands, you should really ask yourself, "Can I obtain this money?" Have you thought about using your credit card or tapping your savings account? Are you able to cash out your paid time off from work? You might be able to borrow against your retirement account. These are all viable ways to obtain money in a pinch.
Options you might want to consider:
Cash advances on credit cards
Home equity loans
Liquidating savings accounts, savings bonds, stocks, etc.
Liquidating assets (luxury vehicle, real estate, etc.)
Borrowing against Individual Retirement Account, Life Insurance, etc.
If these options don't work for you, continue reading.
Making Tax Decisions Isn't Easy
It's important that you take your taxes seriously. Review all of your options and choose the one that is best suited for your situation. Of course, to avoid the late penalty, it's always best to file your return on time. efile.com can help you file a quick, easy and accurate tax return. Find out what you REALLY owe before you file using these tax estimators. It only takes seconds to get started now and you'll be walked through the entire e-file process with ease. Our service encompasses tax help, resources, and a comprehensive list of tax deductions to help you save the most money on your return when you need it the most.
Can I Pay with an Installment Plan?
Yes, you can set up an installment plan with the IRS to pay your taxes. That's right, the IRS, just like most companies, would rather get paid at some point rather than not at all. If you cannot scrape up the funds to pay your amount due in full when you file your return, the IRS has several options for you:
More information about how to pay your taxes
Ways to Avoid Owing Taxes
The best way to avoid owing taxes when you file your tax return is to carefully manage your income tax withholding or estimated tax payments throughout the year. Here are the steps you can take:
Find out what your tax withholding should be by using an IRS tax withholding calculator
Withhold more tax from your paycheck by submitting a new Form W-4 to your employer
Withhold more tax from your pension payments by submitting a new Form W-4P to the payer
If you make estimated tax payments, increase them by submitting a new Form 1040-ES to the IRS
For more information on these options, see Publication 505 - Tax Withholding and Estimated Tax and Publication 919 - How Do I Adjust My Tax Witholding?
Property Tax Lien by the IRS
The IRS has changed some of the criteria on placing a property tax lien on a property of a deliquent tax payer. Learn more about the potential consequences of a tax lien on your property.