You’ve just crunched the numbers. And no matter which way you slice it, you’ve come to the hard truth about your financial situation: you can’t pay taxes.
Your mind might be racing. You might think the siren in the distance is already the IRS coming to get you since you won’t be able to pay your bill this year.
But fear not. Although it’s not a fun predicament to be in (let’s face it, it’s more enjoyable to get a tax refund than a bill), you’re hardly alone.
People may not pay their taxes for a myriad of reasons, from financial difficulty to simply not paying attention to what they’ll owe.
But all is not lost. Read on for what to do in the event that you can’t pay your taxes.
Calculate What You Can Pay
So, you can’t pay your taxes in full right now. No matter how many times you’ve crunched numbers and moved money, it’s still just not enough.
The first thing you should do is pay what you can pay. Pay as much as possible to avoid interest in payments in the future or having to create a payment plan that’s more than you can chew.
Once you’ve done that, then you can start looking at other options.
Borrow Money From a Friend or Family Member
No one likes turning up on a friend or family member’s doorstep and asking for money. But we all have to suck up our pride and do it sometimes. So, even if your tail is between your legs, hit up someone who might be generous enough to help you out of your tight spot.
Maybe someone owes you money, or you have a friend who you can call in a favor with.
Use this money to pay off your taxes now, and make an agreement with your friend or family members. If they’re unsure, you can even draft up a quick agreement that they can hold you legally accountable if you don’t pay them back.
This way, you’ll avoid any interest charge that may come with using a credit card or creating a plan with the IRS.
Refinance Your House
If your tax bill this year is just out of your reach, refinance your house and you may just get enough money out of it to pay off your taxes. Although it’s not the most glamorous thing in the world, it’s a great way to get the IRS off your back and help you continue to live your life uninterrupted.
Take Out a Loan
If you’ve been a good and trusted customer of your bank, they may offer you low-interest loans. This could be just the ticket to help you out of your IRS tight spot.
Before you take out a loan, weigh the pros and cons as well as shop around for the best interest rates. You don’t want to take out a loan that charges so much for interest that you might be paying twice the amount of taxes you owed originally.
When taking out a loan, make sure you set the repayment schedule for something you pay back realistically each month, even if it is a stretch. You won’t want the bank and the IRS on your back for not paying your taxes in full.
Create an Installment Plan with the IRS
The government doesn’t like not getting its money, but if you can’t pay up now, they’ll work with you to get it paid off before the next tax year.
There are stipulations, however, if you want to use this option. Unfortunately, if you owe more than $50,000 in taxes, the IRS isn’t going to take a payment plan, and you’ll need to figure out something else.
Additionally, you’ll have to pay a fee, though if you meet certain criteria, the IRS will wave it. You’ll also have to pay interest on your back taxes throughout the year as well, which is why it is advisable to pay as much as you can afford immediately.
You’ll also receive a discount if you pay each month by direct debit. If you pay by card via their website, you’ll need to pay an extra fee. If you owe less than $50,000, but above $25,000, you’ll have to pay by direct debit. The IRS doesn’t joke around when it comes to serious money that citizens owe them.
By registering and paying online, you’ll receive a small discount. You’ll also have the installment plan fee waived if you can promise to pay the entire thing in 120 days.
Use a Credit Card
If you’re in a pinch, using a credit card may also work to get you out of IRS trouble. Depending on how what your card’s interest rate is will help you decide if it’s a better idea to pay off the taxes by an installment agreement or in a lump sum with your credit card.
Can’t Pay Taxes? Don’t Despair
If you can’t pay taxes this year, don’t get yourself worked up. It’s never a pleasant situation to be in, but there are definitely options to consider before you throw in the towel.
You can also consult a tax attorney if you feel that you’re paying too much in taxes or need extra help in dealing with the IRS. We deal with problems everyday people run into when dealing with taxes, as well as assist with a wide range of legal services dealing with taxes.
Don’t hesitate to contact us to get a free case evaluation if you feel overwhelmed.