There aren’t many people who associate taxes with having fun. But for those who are facing anxious thoughts that go beyond filling out the paperwork – for example, people who have financial hardships and can’t pay taxes they owe – tax time can feel like much more than just a nuisance. If you’re in a financially difficult position and worried about owing this season, now is the time to be proactive with the way that you approach your taxes!
Use the resources below to help you explore your options and manage your taxes:
Options From the IRS for Those with Financial Hardships
Ask for an extension
Under the right circumstances, you may be granted an extension on your due date. You can gain up to 3 months (or 120 days) of extra time to sort out your finances before writing your check. Though there’s no fee for this extension, your payment must be paid in full at the end of the extension period and you may accrue other interest or penalty expenses.
Ask for an installment plan
The IRS offers the option to set up an installment plan if your tax costs are too high to realistically pay in a lump sum. You will need to fill out an application for the Fresh Start Installment Agreement. The easiest way to do so is by creating an account and applying via the Online Payment Agreement . You’ll be notified immediately of your approval and will then be prompted to set up an online payment timeline.
Credit card or debit card options
The IRS also offers the option to pay your taxes via your debit or credit card. While debit will act in much the same way as a check (taking funds which you already have access to), using a credit card to pay for your taxes is incredibly risky because of the interest involved. Paying tax debt with a credit card is not generally recommended for anyone facing financial hardship or who is in an already vulnerable financial position. However, if you at risk of even more severe penalties from the IRS, then it may be your last resort.
What If You Still Can’t Pay Your Taxes?
There are success stories for those who offer compromise pleas to the IRS, but that doesn’t guarantee that everyone will experience the same end result. This option will require that you compile all your details and information in a way that is compelling to the IRS. You’ll also need to offer proof that you are experiencing financial hardship that prevents you from being able to pay in full.
Borrow… with extreme caution
If you’re unable to pay your taxes, a personal loan or a low-interest loan from Lending Club or a similar peer-to-peer lender might be the be the next best option for you. As always, you must be wary of entering into any loan agreement because a debt that you cannot pay will ultimately accumulate and could have a dire impact on your financial circumstances.
Know your tax penalties
Do not simply avoid paying your taxes or ignore deadlines. The consequences can be costly. Explore all your options and research all your alternatives. Even if you’re in a financial bind, not paying your taxes will result in large financial repercussions. It’s much better to tackle the issue head on as it arises instead of pushing it aside and letting it grow into an even more unmanageable problem.
It’s essential that you file your taxes, even if you don’t have the money to cover the expenses. The penalties for waiting to file far exceed the penalties for filing and then delaying payment. While ideally you don’t face either of these fees, one is arguably better than the other.
Know your tax rights
Though you’re unlikely to escape these payments entirely, you should always be aware of your rights as a taxpayer. There’s no reason to feel unfairly subjected to impossible financial circumstances. If you can still take advantage of alternative opportunities like installment plans or extensions, then do it! Researching these options and doing your “tax homework” doesn’t sound fun, but it could save you a lot of complications, time, and money.
Research your tax breaks
It’s stressful to be in a position where you can’t pay for something – especially when scaled to something as important as your taxes. That’s why it’s also important to take advantage of any tax breaks that you legitimately qualify for so that you’re not losing out on money that’s owed you from the government. These breaks can help to ease the financial burden! Last year, a reported $58 billion went uncollected by taxpayers – a portion of which might have even been yours. For a complete list of tax breaks, check out the IRS website.
Don’t feel embarrassed
Remember: there’s nothing they haven’t seen. The IRS website can be an intimidating terrain to navigate, but they’ve done a particularly good job at presenting your options clearly and directly. One of the most helpful resources for those facing financial hardship can be found on their page titled The ‘What Ifs’ For Struggling Tax Payers, which features a compilation of common questions and scenarios, along with solutions and answers. For instance, the page answers to questions such as “What if I am searching for a job?” and “What if I can’t resolve my tax problems with the IRS?”
If you’re ready to pay off the debt but know that it is going to take a good long time, consider using a free tool like ReadyForZero to make a plan for how you will get out of debt.
Know this above all: there are options for those facing financial hardship. DO NOT simply postpone filing your taxes because the resulting fees will far outweigh any fees for paying in installment or taking advantage of other alternative opportunities to pay back IRS debt. It’s far preferable to be proactive than wait until it’s spiraled out of control. Unfortunately, there’s not a get out of jail free card for the IRS! But by being proactive, you can avoid the worst consequences of not being able to pay your taxes.
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