Don’t panic! Don’t avoid the balance due. Don’t use a credit card to pay taxes.
There are several solutions for resolving a tax bill that you dont have the cash to pay in full.
Start with a review of your tax return in detail with a professional and make sure that you have taken every tax deduction to which you are entitled. Also review your tax return for possible errors – typos/boxes checked.
If you determine that you really do owe the big balance then you have several options:
Online payment plans
Taxpayers who owe but cannot pay in full by April 18 can apply for a payment plan at IRS.gov/paymentplan. These plans can be either short- or long-term.
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- Short-term payment plan – The payment period is 180 days or less, and the total amount owed is less than $100,000 in combined tax, penalties and interest.
- Long-term payment plan – The payment period is longer than 180 days, paid in monthly payments, and the amount owed is less than $50,000 in combined tax, penalties and interest
OR Offers in compromise
An offer in compromise lets taxpayers settle their tax debt for less than the full amount they owe. It may be an option if they can’t pay their full tax liability or doing so creates a financial hardship. The IRS considers a taxpayer’s unique set of facts and circumstances when deciding whether to accept an offer.
Taxpayers can see if they’re eligible and prepare a preliminary proposal with the Offer in Compromise Pre-Qualifier Tool.
Interest is based on the amount of tax owed and for each day it’s not paid in full. The interest is compounded daily, so it is assessed on the previous day’s balance plus the interest. Interest rates are determined every three months and can vary based on type of tax; for example, individual or business tax liabilities. More information is available on the interest page of IRS.gov.
An extension of time to file is not an extension of time to pay. An extension only gives taxpayers until Oct. 16, 2023, to file their 2022 tax return, but taxes owed are still due April 18, 2023.
- If you need help deciding which strategy to deploy, please reach out to me and lets see how we can help you.