Once your taxes are filed, for many of us, especially small business owners, it will be time to pay up. Or maybe it’s time to pay back money that was taken out of a retirement account? Whatever the circumstance, you could owe the IRS thousands and may not have the money to pay right away. So, what can you do? The experts at Broussard Poché, LLP have a few options for you to consider.
Pay what you can upfront:
- Filing your return on time is an important step to fixing the issue. So, don’t put off the inevitable. If you pay some of your tax bill, it will lower the penalties and interest you’ll be charged for a late payment.
- After you send the money you can, you will get a bill with your new balance in about 45 days. If you still don’t have the funds, then contact the IRS and explain your situation. In many cases they agree to a payment in full within 120 days.
Ask to pay in installments:
- If you can’t pay all at once, the installment option may be available to you. Contact the IRS and see if you qualify for an installment plan. If so, you would need to fill out IRS Form 9465, Installment Agreement Request. Under this agreement, you make monthly payments of your bill until it’s paid off.
Ask for a first-time penalty abatement:
- The first-time penalty abatement waiver can be granted by the IRS to relieve taxpayers from failure-to-file, failure-to-pay, or failure-to-deposit penalties. For this waiver to be an option, you must have filed all required returns and can’t have an outstanding request for a return from the IRS. Also, you must have paid or arranged to pay all taxes due and had no penalties for the last three years.
Loans or credit:
- The other options are to apply for loans or pay the taxes via a credit card or line of credit. Just keep in mind you’ll now be paying interest on a loan that will add up to more than you paid the IRS.
- Another important note is that to use a credit card, you’ll have to pay through a third-party service or a tax software program. Be sure to contact the IRS to find out which credit cards are accepted. Also note that there are extra processing fees for credit cards.
If you owe the IRS more than you can readily afford, remain calm and don’t ignore the problem. If you just “hope it goes away” the amount you owe will get larger because of penalties and interest. Be sure to contact your tax professional and ask about which option is best for your situation.