What To Do If You Can’t Pay Your Taxes
Once more, it’s that time of the year when we prostrate ourselves in front of tax forms, software or tax preparation firms, to figure out whether we owe or get a refund on our taxes. Many people find that, due to an inappropriate withholding, moving up a tax bracket, or some other esoteric reason, that they owe more in taxes than they can afford to pay. In such a position, it might be tempting to avoid filing a tax return. This is not your best option. If you fail to file a tax form, you will be penalized with a fine, and that could only add to your problems. If you can’t pay your taxes, the best thing to do is to go to the IRS for help.
Believe it or not, the IRS has a system in place to help you make installment loans. If you owe $25,000 or less, you can apply for a payment agreement with the IRS. You will have to pay interest, but the rate is usually quite reasonable. When applying, you will need some information. The IRS points out that you will need:
- SSN or Individual Tax ID.
- Birth date.
- Number shown at the top of your recent notice of tax due.
- PIN: If you don’t have a PIN, you can use your AGI
- Highest amount you can pay, and when it can be paid
- It helps to have your tax return in hand so that you can verify information
The IRS system will evaluate your payment application and let you know – usually instantly – if you are approved. If you owe more than $25,000, the process with the IRS is different but you still have to contact the them directly to make arrangements.
Of course, if your payment agreement application is rejected, or if you prefer not to deal with the IRS directly and just pay it off, you can go with other options: credit card, line of credit from your bank, a personal loan, or even proceeds from selling stuff you don’t need anymore. However, before you whip out the credit card (with its high interest), it might be worth applying for the IRS installment agreement or check your rate on a peer-to-peer personal loan.
Image courtesy of Marc Levin.
Friday, February 4th, 2011 at 4:30 am