Tax season is well under way, and that is not always good news. For those who get a nice big refund check, this time of year is the best. Actually, tax season is probably already over for those people as they tend to file very early to get their money back as quickly as possible. If you are like me, though, you wait until the last possible minute since you owe money and don’t have any intention on providing the IRS with any of your hard-earned cash any earlier than absolutely necessary. For those of us who owe, tax season is a pain. However, it’s even worse for those who owe and have no way of paying their income taxes. What are you to do when you owe the government money and have no idea how to pay it?
File to save
Even if you cannot pay, file your return. The most common mistake people make when they cannot afford to pay is not filing at all; but the penalties for not filing are far worse than the penalties for not paying. Don’t pay and don’t file and you’re looking at a 5% penalty before interest. If you file and don’t pay, you’re looking at 1%.
Apply for a payment extension
Sometimes the problem isn’t that you cannot pay your taxes at all, it’s that you cannot pay them by April 15. In that case, the IRS allows taxpayers to file an extension for 120 additional days to pay your taxes. You can call the IRS at 1-800-829-1040 to apply for a short-term payment extension. You’ll pay a half percent of what you owe every month, but that’s not bad for a few extra months to pay.
Apply for a long-term extension
You can call the IRS at the same number listed above if you owe less than $50,000 to apply for this. This extension is as long as 72 months and can be applied for by paying $120 up front and then paying half of one percent of your monthly balance throughout the life of your extension. If you opt to have your monthly payments taken from your bank account by the IRS, they’ll lower that fee to $52.
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