Tax season always brings about anxiety and most of all, procrastination. Paying your taxes on time can be stressful if you find that you might not be able to pay everything you owe. Many might be tempted to not file at all or wait past the deadline to file. According to Jean Chatzky, NBC News financial editor, waiting to file could do more damage than good. However, there are stress-free options that can help you pay the amount without causing too much damage to your usual budget. Here are some ways to help you tackle that tax bill:
- File ASAP – Filing on time can save you more money than waiting to file after the deadline even if you do not have the full amount you owe. Not filing your taxes on time will cause interest to pile up and late fees apply to your initial bill. While you may already know that you cannot pay your full amount, filing can help you get a hold of your options before you end up owing more money because of late fees.
- Apply for an extension – The best option is always to pay the amount in full, but if your financial situation does not allow you to do so you can apply for an extension. You can receive up to 120 days of extension. Keep in mind that this option does build up interest so you will likely end up paying more than you initially owed.
- Apply for financial hardship- Similar to the extension plan is to file for financial hardship. This alerts the IRS of your financial hardship and allows you to pay the amount when you are able to do so financially. This option is best for those where paying will affect your day-to-day spending and will leave you unable to pay for your living expenses. However, keep in mind again that this option does accrue interest and fees, so your tax bill will end up being slightly more than you originally owed with this option.
- Payment Plans – A great option that many opt for is to set up a payment plan with the IRS. The IRS offers short- and long-term payment plans to give taxpayers options that best work for their budgets. You can apply online for a payment plan, and choosing the right option is imperative to make sure you do not end up with late fees through the plan as well. This option does allow you to pay overtime without going into default but you do still build up interest. As long as you pay the agreed amount by all your deadlines you will not receive late fees.
- Offer in compromise – In an extreme case of financial hardship, you may be able to qualify for an “offer in compromise” option. This option basically allows you to negotiate with the IRS to pay an amount that is better for your financial situation. This option does require some time and work to get done. You must file an application and pay a nonrefundable application fee. Once you are approved you must pay an initial amount that is about 20 percent of your tax bill, or you can also set up a payment plan option to pay off your new settled amount.
- Credit card or Loan- Another option that can help you make your tax payment on time is to pay it off with a credit card or loan. The most important thing to keep in mind with this option is to make sure to compare interest rates. A personal loan may have a lower interest rate than putting your payment on a credit card. However, using a 0% APR credit card could also be a good option if you are able to pay the full amount in the time before you are charged interest.
Paying your taxes on time and in full is always an important task that comes every year. Do not let yourself fall behind and making another financial burden by not paying on time. There are many options to help you pay your taxes on time and in full if you do some careful research for the best options for your financial situation.
