We’re in the thick of tax season, and if you’re having anxiety about handling what you owe whether personally or for your business, you’re not alone. You’re not alone if you think, “I can’t pay my taxes”. If you’re expecting to owe a large sum to the IRS by the April 15th deadline, and know you’re not going to be able to pay off your debt, there are various ways to approach your situation.
Filing Issues
Even if you can’t pay what the IRS expects of you, you absolutely need to make filing a priority. While the date usually falls on April 15th, this year is a bit of an anomaly, with a filing deadline of Monday, April 18th. With this deadline only a month away, time is of the essence, and the penalties for missing this filing date can be pretty severe, at least from a financial standpoint.
The maximum penalty can add up to a massive 25% fee on the total cost of your debt if you don’t file within the five months following the deadline, in addition to the interest, the initial amount will gradually accrue as long as it takes you to pay back. By filing prior to the deadline, you can avoid this steep penalty fee, and the IRS will be more willing to work with you.
Can I Use Credit to Pay?
While not always the most viable option, there is something to be said about using your credit card to handle a debt to the IRS that would go unpaid. You’ll need to determine whether the interest on your card is higher, or whether the interest charged by the government would be more desirable.
In most cases, a credit card has lower rates than what the IRS enforces in efforts to get their money. If you can’t put the entire debt on your card, you can make a partial payment and avoid penalty fees and lessen the amount of interest you’ll pay over time. The IRS interest rate comes in a half of 1% each month, and continues rising until it hits the maximum of 25% during the following 50 months.
The IRS does accept credit cards, but be aware there’s a fee for using one of the approved processors, which depends on the processor chosen. Right now it looks like Pay1040.com is the cheapest processor, charging a 1.87 percent fee on your transaction.