I Owe The IRS! Now What?
Have to Pay Taxes? Read This Before You Cry!
Taxes are done and you HAVE TO PAY! Before you shed those tears, READ the below tips before you pay those taxes!
Having to pay taxes is not always a bad thing!!! Instead of looking at this bill as the IRS taking more of your money, think of it this way – you just decided not to give the IRS an interest free loan during the year. You decided to keep your money in each pay check and use it in a way to fit your best interest.
So first things first! Let’s look at the best ways to pay the IRS.
- Do you have savings that you can use to pay off the tax debt? If so, then use those savings to pay off that tax bill!!! Why? Because you do not want to set up a payment plan with the IRS to pay off your tax bill unless you absolutely have too! When you set up a payment plan, you will be paying additional interest and fees. These extra expenses will increase the amount that you end up paying overall to the IRS. Remember, however, if you use your savings to pay this debt, replace the amount back into your savings as quickly as you can!
- You can use your emergency fund! Yes – that is correct! You can use your emergency fund to pay off your tax bill if you do not have a separate savings account from your emergency fund yet. Again using this fund is so much better than going into debt or using the IRS payment plan. Replace the funds as quickly as possible so that you are not tempted to go into debt to pay for future emergencies.
- Borrow the money from a family member or a friend – Now only do this if you know the timeframe that you can definitely pay them back. You do not want to lose a friend or disappoint a family member by not keeping your promise to pay them the money back as quickly as you can! You should write up an agreement that shows the amount and the timeframe in which you plan to pay them back. In addition, only borrow what you do not pay using your savings and emergency fund. You should always exhaust your available funds first before you use someone else’s.
- Use a credit card! Ugh!!! That was a hard one to write! If you do not have enough savings, an emergency fund, nor can you ask someone for a loan – use a credit card, if you have one, to pay your tax bill. Plan to pay off the amount on your credit card as quickly as possible. More than likely the interest rate on your card is lower than the interest and fees that you will pay on the IRS payment plan.
- Sign up for a payment plan with the IRS. If all of the above options are not available, please set up a payment plan with the IRS to pay off your tax bill. If you have any funds available, pay what you can first and then set up a payment plan to pay off the rest. When setting up a payment plan, you can choose the amount and the date of when you would like to make the payment. The minimum amount that you are allowed to pay monthly is $25. Choose the highest amount that you can afford to pay and make sure you pay it on time! You can always pay it off early too if you get additional cash – this can be added to your monthly payment.
- THIS IS NOT AN OPTION – An option that you DO NOT have is to NOT PAY IT! You must pay your tax bill. If you do not, the debt will rack up fees and interest! Eventually the IRS can place a hold on your accounts and take what is owed! If you work with the IRS and pay off what you owe, whether it is in payments or all at once, you will be OK!
