If you’re feeling stressed about tax season because you owe Uncle Sam and don’t have the money, don’t overreact. You do have some options. Here are three strategies to try.
Pay in Monthly Installments
One option available for paying taxes — so long as you haven’t previously failed to file returns — is to get on a monthly installment plan. You have two options here: You can file your return like normal, then complete the installment plan form on the IRS site. Or you can file your return with a Form 9465, which is the paper version of the monthly payment plan request.
If you haven’t failed to pay taxes in the past and you owe $50,000 or less, the IRS will likely grant your request. This extension gives you 72 months to pay your taxes. The downside of this option? Interest will still pile up during your repayment period.
Make an Offer
You can also make the IRS an offer of what you think you can pay. If you’re approved, that is the amount you send. The IRS calls this an “offer in compromise.” The IRS says this offer must be “legitimate,” and the agency considers a few factors when deciding if you’re approved, including your income, assets and expenses.
This option comes with a $205 application fee, so make sure whatever number you’re offering is a good one. Also keep in mind that if you’re approved you’ll be paying 20 percent upfront, then the rest in installments.
File and Make a Partial Payment
Your final option if you’re unable to pay your taxes is to file and make a partial payment. This isn’t a great idea, because it’s always better to have a payment plan in place. However, it’s better than not filing.
No matter what you do, make sure you file your taxes. As US News reports, the penalty for not filing is way worse than the penalty for failure to pay. If you fail to file, you’ll be charged 4.5 percent of your balance per month until it hits a 25 percent max charge. If you file and claim failure to pay, the interest is only 0.5 percent per month.