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This past weekend I did my taxes and found out I owe Uncle Sam a nice chuck of change. Thankfully, I prepared for this by stashing away money. If you find yourself in this predicament without any savings, I share five tips to pay off your tax bill below.
- Take a deep breath and face the situation head on. Avoiding your tax bill will only lead to penalties that will end up costing you more in the long run. The IRS can also go after your assets and wages if you attempt to avoid them.
- Filing an extension is not the solution. An extension only extends the time to file your tax return and not the time to pay your taxes.
- Figure out what payment options are available to you. You can set up an installment plan with the IRS, or you can pay using a credit card – but it will cost you! You’ll have to pay interest with both options. Make sure to do the math to see which will cost you less. There is also a $43 fee when entering into an installment plan with the IRS. Another option to consider is borrowing money from a relative or friend.
- Buy yourself some time. Pay as much as you can when you file and then wait till the IRS sends you a bill. Keep in mind that interest and penalties continue to accrue on the unpaid balance, but if money will be coming in soon, this may be the option for you.
- Settle with the IRS. This option may save you a lot of money, but it will take time and there is a $150 fee. Along with an application, financial statements and other paperwork must be turned in. This option is not for haggling a lower tax bill, but to come up with an agreed amount to pay.
For more information about paying your taxes talk to your tax preparer. I’m not an expert, but all this information was explained to me when I filed. If you haven’t filed yet, there are options for lowering your taxes like contributing to your retirement accounts. I got slapped with a bill because I’m single and have no dependents. I’m paying the bill completely to avoid interest.
Have you filed your taxes yet? Will you be paying or are you hoping for a refund?
Welcome to Bargain Babe! I’m Mara, and I’m so glad you’re here. I am an obsessive bargain hunter and penny pincher, and I am determined to live a full life without EVER paying full price.
@Yazmin ~ Like you, I saved $$$ ahead of time, as I always end up owing the state. Sometimes I get enough federal refund money to cover that, but not always. I also save up ahead of time for property taxes and annual insurance (homeowners and automobile), as those cost quite a bit. I’ve learned my lessons the hard way, and now always keep some emergency $$$ in a savings account for just these situations.
@EllieD I knew I’d end up paying for last year and that’s why I prepared. I actually paid less by itemizing my expenses. I’m glad I planned ahead.
@Diane Not sure what you’re talking about. The site was recently updated because it’s been having tech problems and the spell check popped up late last week.
@Diane You may want to clear your cache. My comment hasn’t been updated since I posted on Friday afternoon.