Meanwhile, filing a payment without paying the full amount only results in a half percentage point interest on the owed amount until the payment can be fully paid. It should be noted that postponing payments is only effective for taxes that are less than US$25,000.
Additionally, if you file your tax returns late, you could negatively impact your potential future tax benefits.
Take Control
Taking control of your situation by asking for a possible payment plan could spare you a lot of future troubles. You could also file a Form 9465 (Installment Agreement Request) along with your tax return. The form allows you about 60 months to repay the owed payment. There is also an option where you can set up a monthly automated payment with your bank so that you don’t have to mail the IRS a payment every month. This can be especially helpful if you are nervous about missing payments that could result in further penalties.
Keep in mind that the IRS also now accept electronic payments, making it a lot easier for people to make tax payments now.
Look for Quick Ways to Make Money
Stocks, bonds, certificate of deposit, and other securities that you may own could be easily liquidated for some quick cash. You could even hold a garage sale or sell some items you don’t need online to gain some money to help with your tax payments. It is important to note that the most effective way to do this is to only sell what you already own — don’t purchase more stocks to sell or purchase items to sell online.
Use Your Assets
If you own assets and cannot make a tax payment, you may want to consider an installment agreement. Owning assets without a commensurate income could result in the IRS filing a lien against you. This can cause you credit rating to fall and make it harder for you to take out loans. Additionally, your employer could also start taking out payments from your paycheck through a levy. As such, don’t try and sell any properties you own without taking care of your tax debt first.
If You Absolutely Need To, Borrow
While it may not be the best way to solve this problem depending on your financial situation, sometimes taking out a loan, borrowing money from someone, or using your credit card to make your tax payments can really help.
You also have the option to take out a loan against your retirement plans — like the 401 (k) if you live in the United States — but this is a bit complicated and could result in some negative impacts. As such, one should treat this course of action as somewhat of a last resort.
And, last but not least…
Do Not Ignore Your Bills
If you receive a bill, the worst thing you can do is sweep it under the rug and ignore it. Instead, contact the IRS and try to see if you can come up with other ways to pay. The IRS is always open to helping you find a solution should you be working through financial troubles.
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