Gathering all of your tax documents each year can be a daunting task. Yet, for most people tax season is ultimately a time of anticipation for the refund they will be receiving. The average person receives approximately $3000 in their tax return.
However, despite being in the minority, there are those who owe money to the IRS each April. A percentage of those include people who are unable to pay what they owe. This is a tough situation to be in, but choosing not to file because you can’t afford to pay your taxes will put you in an even tougher bind. Filing your taxes is a must.
If you owe Uncle Sam money after filing your taxes but are unable to pay, you are penalized 0.5% per month of the balance owed. If you don’t file at all, your penalty will be 5% per month, a ten-fold increase! So file your taxes regardless of your financial situation and then look for alternative options to pay down the balance. Here are some options:
- An interest-free loan from friends, family, or your boss. While this isn’t always a comfortable place to be, neither is being chased by the IRS.
- A signature loan from a place like a credit union. Sure, you will pay interest, but your balance will get paid down and you will now owe a financial institution the money instead of the IRS, a much less stressful situation to find yourself in.
- Pay your taxes on your credit card. This option is costly but still effective. You will pay around 2.5% of the balance up front in fees and then whatever interest rate your credit card currently charges.
- Work out a deal with Uncle Sam. The IRS may surprise you at their willingness to work with you. But the only way to find out is to take the initiative and ask.
There are always options for even the toughest of tax situations, but you must speak up. Help is always just around the corner. Consult your financial professional or contact the IRS directly if you need assistance.