21 Apr, 2015
If you’re unable to pay your taxes then it’s important that you file your tax return anyway, as you will be charged hefty penalties for failing to file your taxes on top of the penalty for not paying them on time. The good news is that in order to reduce the hit that not paying your taxes will have on your wallet, there are some options available to you. Here are a few things you can do if you aren’t able to pay your whole tax bill.
Use Your Credit Card
It’s usually not recommended that you replace one debt using another, however if your ability to pay taxes is being compromised due to a timing issue instead of the fact that you simply don’t have the money then you can use your credit card in order to pay your income taxes. The IRS will accept all major types of credit cards such as American Express, Visa, Mastercard and Discover. In order to make a payment all you have to do is head over to the IRS’s website and make a payment. You may also pay by phone using your credit card.
Look Into an Offer in Compromise
An Offer In Compromise will let you settle your tax debt for a smaller amount then what you owe. The IRS will take a bunch of circumstances into consideration such as your inability to pay, your expenses, your income and your asset equity when determining if you are eligible for an Offer in Compromise. In most cases the IRS will only allow you to take an OIC if they believe that you’re unable to pay the amount that’s due within a certain amount of time. In order to be eligible to have up to 80% of your tax bill cut you must be up to date with all of your payment and filing requirements and you will not be eligible if you are in an open bankruptcy proceeding. You will need to pay $186 in order to apply for an OIC, as well as make a 20% lump sum payment of the taxes that are due so take this into consideration before choosing this option.
Gain an Installment Agreement
If you aren’t able to pay your entire tax bill all in one go then you should consider obtaining an installment agreement. You won’t need to negotiate for this, since if you owe less than $50,000 on your combined individual taxes, interest and penalties and you’ve kept up to date on filing your tax returns, you can automatically sign up for an installment agreement and will likely be able to gain one. All you have to do is apply for one online in order to set up a monthly payment plan with the IRS. The IRS will typically let you know within a month whether or not your request has been approved, however as long as you meet the criteria, you should have no problem in getting an installment plan.
Consider Re-Financing Your House
Even the IRS recommends that you use this option if you are unable to afford your taxes. If you have any amount of equity in your house, then using it in order to resolve your tax debt can make financial sense. Mortgage rates are currently pretty low, and you are able to deduct any home mortgage interest incurred on your taxes as long as you itemize it.
Pay What You Can
A little amount is better than nothing when it comes to paying off your taxes. The more that you’re able to pay right now, the less interest and penalty you will incur and owe later down the road. If you decide to mail in your partial payment then ensure that you make your check payable to the U.S. Treasury. Ensure that you follow up right after sending it; in order to resolve the outstanding debt you’re dealing with.