April 15 is the tax deadline, and it’s always pretty stressful for everyone. When preparing your tax forms, if you find out you owe the government money, you may worry about where to get the money to pay for it, especially if you were expecting a refund instead.
- File your income tax returns on time. That way, you have enough time to fix a problem (such as coming up with money to pay what you own). You may file as early as the first week of January. The sooner you file, the more time you allow yourself to work out a solution.
- Use a professional service or accountant to make sure you completed your tax forms correctly. You may have missed out on some deductions you are eligible for.
- If you still owe money, send in your form anyway, even without payment. It is a federal offense not to file your income tax returns. You cannot be jailed by the IRS for failing to pay your taxes because of lack of funds. The IRS will automatically send you a letter reminding you of your failure to pay the taxes owed. You will be charged a late penalty.
- If you need to pay the tax right away, use your credit card. You will delay paying off the bill for one cycle and opt to pay the balance in installments. Keep in mind you will pay interest rates on the balance.
- Take out a personal loan. Check with your credit union or bank and see if you qualify.
- If you own a home, take out a home equity line. The interest on an equity loan will be deductible for next year’s filing.
- Fill out an online Payment Agreement with the IRS. It is called an Installment Agreement Request, which is a form you can download and it comes with instructions. You may qualify for this if you owe less than $25,000. You must be able to pay off the tax bill within a five year period. The interest rates will be more forgiving compared to those charged by the banks.
- Consult a tax attorney or an accountant for advice. Not being able to pay for taxes owed because of lack of funds is not a rare occurrence. There are laws to protect your interests. Ask what options you have given your specific financial situation.
- Don’t panic and hide from the IRS. Death and taxes are the only sure things in the world. If you owe money to the government, avoiding them will only make the problem worse. Just like student loans, money owed the IRS will never go away until you pay if off. You cannot default on it.
- Don’t assume that because you don’t have the money, you don’t have to pay. You will need to pay whatever is owed. Set up a payment plan with the government or they may go after your assets and future income.
Not being able to pay is stressful but a resolution can be achieved. Be open to installment options and be upfront. Hopefully, you’ll get a refund next year.