Discovering you owe more than expected can leave you feeling defeated. Not getting a tax refund is bad enough. But finding out you owe a lot of money is even worse. Use this free tax refund calculator to get an idea if you will owe money to the IRS this coming tax season.
Once tax season rolls around, read your completed tax return carefully before you submit it. Look to see if you actually owe the government money.
If your tax return is missing deduction or credit you thought you qualified for, make sure you answered all the questions correctly. One missed question or checkbox can cause you to miss out on tax benefits you may be entitled to.
Double check the forms to ensure you included all of the right information. You should stop and investigate the change. Unless you have a credit card with a very low annual percentage rate APR or are able to secure a personal loan at a very low interest rate, you might be making your long-term situation worse. Filing a six-month tax-filing extension using Form won't help.
This extension only gives you more time to file your paperwork; it doesn't give you more time to pay what you owe. Filing your return on time can help minimize the penalty and interest charges assessed by the IRS. The IRS's late payment penalty is 0. So simply filing your return on time can save you a substantial amount in penalties.
If you believe you have a legitimate case due to undue hardship, you can file Form to request a six-month payment extension. Along with this form, you'll have to submit a statement of all your current assets and liabilities and an itemized statement of all the money you've received and spent in the last three months.
The IRS rarely grants payment extensions, and it will only be granted if you can demonstrate undue hardship. If you think it will take you more than a few months to pay your tax liability, consider applying for an installment agreement. You can apply online at IRS. An installment agreement can prevent the IRS from taking enforced collection action.
You'll still owe penalties and interest, but your monthly payments let the IRS know that you intend to make good on what you owe. If you have an emergency fund, this is a good time to dip into those savings. You can use your emergency fund as an interest-free loan to yourself to pay off your tax bill and then start replenishing your fund with each paycheck. If you own a home and you have enough equity, another way to borrow from yourself is with a home equity line of credit HELOC.
These loans have relatively low interest rates compared to credit cards and personal loans. The downside is that your house serves as collateral. Defaulting on a home equity loan or HELOC is like defaulting on your mortgage—it can cause you to lose your house.
However, borrowing money this way will turn the large lump sum you owe the IRS into a manageable monthly payment to a mortgage lender.
Another option is to borrow from a retirement account like a k or IRA. It also damages your retirement savings plan. Unfortunately, the IRS is going to charge you interest and penalties on any amount you pay late. Like running a balance due on a credit card, these charges are going to make it harder to pay what you owe.
The more you're able to pay on time, the less interest and penalties you'll be assessed. The IRS will eventually send you a bill, but you don't have to wait to get the bill to make additional payments. Pay what you can when you file your return, then send in whatever additional payment you can afford each payday using Form V.
Whatever you do, don't ignore the problem. The IRS can freeze your bank accounts; garnish your wages; seize physical assets, such as your car; and place a lien on any assets you own, including your home. If you find you can't pay what you owe, go ahead and file your return and pay what you can. Then work with the IRS, perhaps with the assistance of a tax professional, to formulate a plan for paying the balance of your tax bill over time.
For taxpayers who prefer to pay their taxes in cash, the IRS offers a way for them to pay at a participating retail store. It generally takes five to seven business days to process these payments, so taxpayers should plan to make sure their payments post on time.
Check or Money Order. Taxpayers can send a check or money order with their tax return or when they get a bill. Before submitting a payment through the mail, taxpayers should consider one of the quick and easy electronic payment options. A short-term payment plan may be an option.
Taxpayers can ask for a short-term payment plan for up to days. Taxpayers can also ask for a longer term monthly payment plan or installment agreement. What is Form V? Estimate your tax refund and where you stand Get started. See if you qualify for a third stimulus check and how much you can expect Get started. Easily calculate your tax rate to make smart financial decisions Get started. Estimate your self-employment tax and eliminate any surprises Get started.
Know what dependents credits and deductions you can claim Get started. Know what tax documents you'll need upfront Get started. Learn what education credits and deductions you qualify for and claim them on your tax return Get started. The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Skip To Main Content.
An installment plan allows you to pay your taxes over time while avoiding garnishments , levies or other collection actions. You'll still owe penalties and interest for paying your taxes late , but it can help make the payments more affordable.
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