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What To Do If You Can't Pay Your Tax Bill

by Wallace Hanson

If you've procrastinated filing your tax return, there's a good chance that you owe money. If not, you probably would have filed already to get your refund faster. If you do owe, and you're waiting because you don't know where you're going to find the money, take the following steps.

1. File Your Tax Return Right Now

You do not need to make your payment when you file your return. The deadline to pay is April 15th regardless of when you actually file.

What's the point in not waiting to file? The IRS has separate penalties for late filing and late payment. If you don't file until you can actually pay, you'll end up paying more than if you make sure to file on time no matter what.

2. Look Into a New Credit Card

Most people try to avoid paying their taxes with a credit card because there is a fee to cover the credit card processing charge. In some cases, you can make the fee work for you.

If you can find a good cash back or airline miles card, the rewards earned on your tax payment could be worth more than the fee. This is especially true if you get a new card with a new spend bonus.

More importantly if you're short on cash, many new credit cards come with a no interest period of 12 to 18 months. There isn't really anywhere else where you can get an interest-free loan.

3. Talk to Your Local Credit Union

Credit unions frequently issue small personal loans with low interest rates. They understand that tax season can be tough and are often willing to help people get approved when they need money to pay their taxes on time.

If you go this route, make sure the loan has no early repayment penalties. This way you can pay it off as soon as possible and minimize your interest.

Why a credit union and not a bank? Credit unions generally have lower interest rates and an easier approval process, but if you have a bank you like, you can use them.

4. Get an IRS Installment Agreement

If all else fails, you can request a payment plan from the IRS. For most tax debts, the plan is automatically granted as soon as you file the form.

The downside is that there's a fee for entering into an installment agreement, the interest rates may be higher than from a private lender, and late penalties apply until your taxes are paid in full. For more help, contact a tax preparation specialist near you.