One of the more unpleasant financial experiences that many people have is that of paying taxes. Many people with regular jobs manage to have the taxes withheld on their behalf, and owing taxes come the middle of April isn’t really an issue. And, for many of those who are self-employed, paying quarterly taxes can take some of that pressure off. However, in some cases, you might be surprised at how much you made, or experience a windfall.
In such cases, realizing that you owe taxes can be a real problem. You have to come up with the money to pay what you owe. But, what if you don’t have the money? Or what if you don’t want to completely wipe out your emergency fund in order to pay your taxes? If you are struggling to pay your taxes, the good news is that you have an option.
First of All: Make Sure You File Your Tax Return
The first thing you need to do is make sure that you file your tax return. Some people think that if they don’t file, they can put off the consequences associated with not paying taxes. While this might work for a short period of time, the long term result can be devastating. The government imposes a rather hefty penalty for failure to file. You could find yourself in even worse financial shape. Make sure that you file your tax return.
IRS Payment Plan
Interestingly, the IRS actually offers a payment plan. If you owe less than $25,000 in taxes, interest and other penalties, you can sign up for the payment plan. You apply online, and let the IRS know how much you think you can pay each month to discharge your tax obligation. You will have to pay fees, as you would with any other loan, but the IRS payment plan is a little easier to qualify for than a bank loan. And what you pay for it is competitive with other loans — and much cheaper than using your credit card or getting a payday loan.
The IRS installment plan can be a way for you to meet your tax obligation without having to pay a great deal in fees and penalties. And it’s certainly a better option than trying to ignore the problem and let your tax debt pile up. As with most other things in life, it is a good idea to solve these issues as quickly as possible.
State Payment Plans
Many states also offer installment plans for those who need to pay their taxes in segments, rather than paying all at once. Make sure that you remember your state taxes as you add up your tax liability. It’s easy to forget that your state government will be looking for income taxes as well. When making your tax plans, be sure to keep your state taxes in mind. You can call your state’s tax office to get an idea of the process that you should follow if you want to set up a payment plan with your state.