Tax Day may have been delayed a few months, but what if you’re still dreading July 15 because you don’t have the money to pay your tax bill?
First and foremost, file anyway. Your bill won’t even come for a month, so if it’s an issue of waiting for a paycheck to come through, take a deep breath. But if you need more than 30 days, you’ve got options.
1. Apply for an Extension
If you can get the money together in 120 days, apply for the 120-day extension. There’s no application fee, but you’ll have to pay interest and penalties (at a lower rate than an installment plan, and far less than what you’d be charged if you simply don’t pay at all).
2. Set Up an Installment Plan
You have the option of breaking up your payment into installments. You’ll pay a setup fee ($31 – $149), depending on whether you choose to set up automatic transfers from a debit account or choose how much you pay each month. Penalties and interest will continue to accrue until you’re all paid up.
3. Negotiate a Compromise
If an extension or installments won’t work for you, you can apply for an offer in compromise, so you can settle your tax bill for less than you actually owe. Offers in compromise are awarded based on financial hardship — your ability to pay, your income, your expenses, or your asset equity. (Check your eligibility using the IRS’s pre-qualifier tool.) An offer in compromise is essentially a negotiation: You’re telling the IRS that you’re more likely to pay in full — and promptly — if you can pay less. You’ll have to pay a $186 application fee.
4. Use a Credit Card
You can use a credit card to pay your tax bill, but with some hefty caveats. Keep in mind that you’ll have to pay a fee ranging from 1.87% to 1.99% on your tax total. Paying with a credit card makes the most sense if your tax bill won’t max out your card and if you can make regular payments. Otherwise, you could totally screw your credit score and end up in a deeper financial hole.
More on HerMoney:
- 5 Ways Small-Business Owners Can Prepare for Tax Season
- 2020 Tax Filing Tips for Women Who’ve Gone Through Some Stuff
- This List Will Save You Money on Tax Prep This Year
- Grab Extra (Tax) Credits and Deductions for Education Expenses on Your 2019 Return
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