The calendar is already turning to April, which means the tax filing deadline is just around the corner. For those who owe taxes, this is not good news.
Finding out you owe federal taxes is never fun. In some situations, it can come as a shock. This is easily the case for those who might not have realized they were classified as independent contractors until they receive a 1099. Failing to provide proof of health insurance could also open you to a penalty.
To follow up our post last week on California tax options, here we cover paying your federal tax bill. Some of the advice is the same. The Internal Revenue Service has a video that shares information about federal collection efforts.
File on time
Even if you cannot pay the total amount you owe, you can avoid one penalty by filing your return on time. Pay what you can with the filing to reduce interest accumulation.
A loan at a reasonable interest rate may also be preferable to the penalties and interest that will accrue for failing to pay. Credit cards are another option, especially if you qualify for a zero percent offer. With either of these be careful and ensure you will be able to repay the amount of money you borrow.
The IRS offers payment plans that also spread out repayment of your tax bill. You may not realize that you do not need to wait for a bill from the IRS to set one up.
Filing Form 9465, Installment Agreement Request with a tax return is another way to set up one of these. Direct debit is available, so you won't even need to write a check each month.
If a financial hardship - a serious illness or injury - has occurred in the last year, you may apply for an Offer In Compromise. Seek guidance from a tax attorney prior to applying for the best chance that your offer will be accepted.