If you're anxious about the upcoming July 15 deadline because funds are low, don't panic. Always file your taxes, even if you can't pay immediately, since your bill won't arrive for about a month.
Here are four strategies to help you pay the IRS when cash is tight.
1. Request a 120-Day Extension
If you can gather the necessary funds within 120 days, request a 120-day extension. There's no cost to apply, although interest and penalties will apply, but at a lower rate compared to an installment plan.
2. Set Up an Installment Agreement
You can choose to pay your taxes in installments. There's a setup fee that ranges from $31 to $149, depending on whether you opt for automatic debit or manual payments. Keep in mind, penalties and interest will accumulate until the balance is cleared.
3. Propose an Offer in Compromise
If extensions or installments don't suit your needs, you might consider an offer in compromise. This allows you to settle your tax debt for less than what you owe, based on your financial hardship. Factors like your income, expenses, and asset equity will be assessed. Use the IRS pre-qualifier tool to check your eligibility. There's a $186 application fee for this option.
4. Pay with a Credit Card
You can use a credit card to pay, but be careful of fees ranging from 1.87% to 1.99% on your total tax. This method is best if your tax amount doesn't max out your card and you can make timely payments. Failure to manage this could harm your credit score and worsen your financial situation.
