Taxes come every year, and like the in-laws, can’t be avoided forever. Even if you file an extension to file your taxes later, they can’t be put off forever. You’ll still have to file them.
However, even though you can get an extension for filing your taxes, you can’t get an extension for paying your taxes. They have to be paid for by your original tax filing deadline or you will face penalties and high-interest rates.
So, if you can’t pay your taxes up front, don’t ignore them, because you could sink yourself into an even worse financial situation. Even if the tax is tentative, it’s best to go ahead and pay it.
Note: A tentative tax is the estimated amount that your tax bill will be. It could end up being more or less than you owe. Tentative taxes are estimated before any credits are taken into account to increase the amount owed. Many business owners use the amount that they paid their prior year as their tentative tax estimate.
This brings us to the burning question, what do you do if you simply cannot pay your taxes? One solution is to look into getting an installment plan.
Basically, an installment plan is an agreement you make with the IRS in order to pay off your taxes in agreed upon monthly installments until the total amount you owe in taxes has been paid off.
The IRS understands that not everyone can pay the amount of taxes they owe before their deadline and usually offer reasonable monthly rates. If you owe less than 25k you can get an individual installment agreement, which will work with you to find the monthly rate you can afford.
If you owe more than 50k you’ll have a monthly rate to pay off that’s set by the IRS and your lines of credit, assets, monthly income, monthly expenses, and employment will be taken into consideration. Your property could be seized by the U.S. government with the inability to pay off your installment plan.
You’re encouraged to pay as much as you can because the faster you pay off your taxes the better. Installment plans do come with high rates of interest, so they are often better used as a short-term solution and should be avoided in the long-term.
Also, put as much as you can towards the amount of taxes you owe before setting up an installment plan in order to get a lower monthly rate.
You may be encouraged to pay your taxes upfront with a credit card because credit cards offer lower interest rates, and sometimes depending on how much you owe, lower monthly rates.
Plus, you may have a longer amount of time to pay off your credit card debt. Oftentimes, installment plans come with inflexible deadlines, and you don’t want to default on your monthly payments.
With a credit card, you can pay your taxes upfront, to avoid owing the IRS money over time. Also, you’ll owe the credit card company instead of the IRS, so the collectors coming after you on that debt may be a little gentler, even if your credit score takes a hit, which could happen either way.
We suggest seeking the help of a CPA or tax professional to find the best option for you if you can’t pay your taxes. They will negotiate with the IRS for you to find to get the best installment plan possible for your situation.
ExpressExtension is Here to Help
If you need to file an extension for filing your taxes ExpressExtension makes it easy to do, in a matter of minutes. We have the forms you need online with step by step instructions on how to fill them out. If you have any questions feel free to contact our outstanding support team.
Also, if you have any information regarding installment plans or personal experiences with them to share please add your comments to the section below.