Business & Finance Taxes

What If I Can"t Pay My Taxes?

Did you just finish your tax return and you are now realizing that you owe more money than you can actually pay? If so, don't worry, you have options.
The IRS has put in place many mechanisms to deal with this problem so individuals don't feel they have to hide from the IRS.
One of the worst things that a tax payer could do is not file their taxes because they know they won't be able to afford the tax bill.
Realize that there are penalties for not paying and not filing, the not filing penalty being the greatest.
If you realize you won't be able to pay and do the appropriate filings, you will not be charged penalties.
Below are some methods to for resolve a tax bill that you cannot afford to pay.
  1. Enter into a payment plan with the IRS or state.
    A payment plan is the preferred method of the IRS and most states.
    Once you enter into a payment plan you will pay the taxes you owe in monthly payments.
    One thing to note about this is that you will continue to be charged interest on the amount outstanding and it is required that you are able to pay off the full amount in a period of 3 years or less including interest.
  2. Get help from a tax professional or tax relief company.
    Many times it is highly suggested that you talk with a tax professional when you have problems with the IRS.
    Since there are so many different methods of payment and settlement available with the IRS, a tax professional will be able to analyze your financial situation and figure out what method would be best for you.
    The long term benefit your receive from the service most likely will outweigh the cost of the professional fees.
  3. Consider borrowing money from family and friends.
    If you think you will have the money to pay them back in a short time, this is a good option.
    If you don't see foresee the money coming within a 2-3 month period to pay them back you are better off selecting a different option.
  4. Pay on a credit card.
    You are allowed to pay taxes on your credit card.
    Know that most credit cards charge a higher interest rate than the IRS does with its payment plans.
    This is a good option if you have a zero percent interest rate or you know you will have the money to pay it off when the bill comes due.
  5. Refinance your home.
    If you own a home and have built up equity in it, it is likely you will be able to refinance your home and use the equity to pay off your taxes.

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