Photo: Flickr via eyesogreen
If you’re among the four in 10 Americans wondering how they’ll afford their tax bill this year, now is the worst possible time to stick your head in the sand. For one thing, the IRS isn’t some credit card company you can simply call up to negotiate your way out of fees. They will gladly slap you with late penalties, jack up your interest rate and send collectors after you while you twiddle your thumbs–unless you act first.
Here are four ways to keep the IRS from calling:
Pay whatever you can upfront. There’s no need to throw your entire savings account at your tax bill if you can’t afford it. Most tax software will allow you to pay a portion of your bill rather than the whole enchilada. This way, you’ll skirt around any late fees and buy yourself some time.
Pay by plastic. You can pay by debit or credit card, but keep in mind you’ll have to choose from a list of approved tax payment vendors for the latter option. Fees for using a credit card range from 2 to 4 per cent of your bill–not to mention the interest you’ll accrue on the card balance itself. On the other hand, if you’ve got a card with a 0% introductory APR, you won’t have to worry about it.
Work out a payment plan. This is the most sensible option, especially if you know you’ll be in for the long haul. The IRS calls it a “instalment payment agreement” and offers a few ways to sign up: fill out the Online Payment Agreement application or by submit a Form 9465-FS, instalment Agreement Request along with your return. Unless you can pay within 120 days, be ready to pay a fee upfront: It’s $52 for a debit agreement, $105 to deduct payments from your salary or $43 for low-income taxpayers.
Ask for an extension. You’ve got until April 17 to submit a form 1127-A, Application for Extension of Time for Payment.