April 15th has come and gone, and taxpayers from sea to shining sea sent Uncle Sam a tax check. Because of tough economic times, though, many weren't able to make the necessary payment to the guy with the grey goatee. This may happen to you sometime in the future, so it's important to know that taxpayers have some payment options.
Gloom and doom pervades in the financial headlines these days, especially around April 15. A large percentage of the population will either receive a refund or grudgingly write out a check to the IRS, filing their returns like they normally do every year. But for those feeling the pain of the current economic conditions, paying Uncle Sam might not always be an option.
Because you never know if some unforeseen circumstances will make it difficult for you to pay the taxman, you should become familiar with the alternatives.
File no matter what
It's essential that you file your tax return or an extension by April 15th, even if you feel like you can't make the payment. Failing to file one will cost you 5 percent a month, up to 25 percent of your total bill. The failure-to-pay bill is much less stringent-just one-half of 1 percent per month, up to 25 percent of the total bill.
Getting over the hump
If you don't set aside money for your tax bill, there are short-term options. If you owe less than $25,000 in combined tax, penalties, and interest, the IRS allows a 120-day extension. You'll need to file an "Online Payment Agreement," and you'll be hit with penalties and interest until you pay the total you owe.
The IRS also provides an installment agreement plan. It has fees and charges interest, but the government will cut you some slack if you can agree to make an ongoing payment.
Opting for partial payments
If you find yourself in truly dire straits, you may choose to apply for IRS options, such as a partial-payment installment plan or an offer-in compromise. These are last-resort choices, and are rarely extended by the IRS. The partial payment choice is the most widely used of the two. The offer-in compromise delays payment for people who have assets, but can't access them due to market conditions.
Taking from Peter to pay Paul
There are other, non-IRS options to consider, but these may only accelerate the downward spiral of someone in debt. You could use a home equity loan or credit card to pay off your tax bill, but expect to pay interest and fees. Another option is to ask friends or family for a loan.
Tough times only get tougher as April 15th nears. For Americans feeling the pain of a sagging economy, this is not an annual event to be celebrated. However, there are options to paying your tax bill. Uncle Sam is willing to help you get through the pain today, as long as you promise to pay him tomorrow.