DO YOU OWE TAXES AND CAN NOT PAY BY THE DUE DATE?
The vast majority of Americans get a tax refund from the IRS each year, but what if you are one of those who end ends up owing? The IRS encourages you to pay the full amount of your tax liability on time by imposing significant penalties and interest on late payments if you do not. So if you are unable to pay the tax you owe, it is in your best interest to make other arrangements to obtain the funds for paying your taxes rather than be subjected to the government’s penalties and interest.
Options to consider:
Family Loan – Obtaining a loan from a relative or friend may be the best bet because this type of loan is generally the least costly in terms of interest.
Credit Card – Another option is to pay by credit card.
Installment Agreement – You will still be subject to the late payment penalty, but it will be reduced by half. Interest will also be charged at the current rate, and there is a user fee to set up the payment plan. In making the agreement, you will have to agree to keep all future years’ tax obligations current. If you don’t make your payments on time or have an outstanding past due amount in a future year, you will be in default of the agreement and the IRS has the option of taking enforcement actions to collect the entire amount owed.
Tap a Retirement Account – This is the worst option for obtaining funds to pay your taxes because you are jeopardizing your retirement and the distributions are taxable at your highest bracket, which adds more taxes to your existing problem. In addition, if you are under age 59½, the withdrawal is also subject to a 10% early withdrawal penalty that compounds the problem even further.
If you would like to discuss your options, please give this office a call 256-489-1478 or click here to schedule a 15 minute consultation.
For more tax resources, click here.