How Can I Get Extra Time to Pay?
Sometimes after doing the math and calculating our income, deductions, and credits, we get a tax bill instead of a much-wanted tax return. But if the tax bill is bigger than you expected and you need more time to pay, getting more time to pay it off is a possibility.
Here’s an overview of your options:
Obtain an Extension to Pay Your Taxes
Fill out and submit Form 4868 before tax day falls on April 15. You can get an extra four months to pay, giving you valuable time to collect a few more paychecks and save the needed funds to pay your tax debt.
Submitting the form is simple: you can do it either online or via snail mail. The IRS doesn’t require any particular reason to do it.
You’ll still have to give the IRS an estimate of your tax bill, and while August 15 becomes your new deadline to pay, you’ll still have to file your taxes by April 15. To avoid the monthly interest of 0.75 percent, try to pay as soon as possible. While interest may be inconvenient, not filing an extension surges your interest rate to 5 percent each month.
Still Need More Time? Apply for an IRS Installment Plan
An installment plan is a convenient option for paying a moderately-sized tax bill that can’t be paid over a few months time. The beauty of IRS installment plans is that you can obtain one after receiving an extension for your tax bill to August 15.
Form 9465 is your friend for this payment option. Fill it out and turn it in by April 15 if you don’t get an extension, or by August 15 if you do.
Your payment plan has a good chance of getting the IRS’s nod if the payment plan you propose won’t raise any eyebrows. For example, if your payment plan would pay off your total tax debt within a couple years, you have a pretty good chance it’ll get approved.
But if you let your tax debt get too high and you try to pay it off with an installment plan, the IRS will make you jump through a few hoops. This is usually the case if your total tax debt is $10,000 or more.
One last thing: installment plans are encouraged by the IRS for paying back tax debt as they help ensure payment, but the extra time isn’t free. There’s a small monthly interest charge and a setup fee.
How Can You Avoid Needing Extra Time? Prevent Back Tax Debt Before It Starts!
Getting stuck with back tax debt is nothing but bad financial situation. If your business has back tax debt, forget about expanding until it’s paid. If you yourself has it, then you better live feebly for a few weeks.
Preventing back tax debt is key to avoiding all this. Your best bet is to work with a tax professional to sort out your finances. A tax professional can also help you plan your finances and put you or your business in a better financial position in a few months time.
Back tax debt can also be prevented by properly using tax credits and deductions. A generous credit may be tempting, but if it’s not justified you’ll end up paying it all back in the end.
If you need more time to pay your tax bill, it’s not the end of the world. There are options taxpayers and business can pursue to avoid trouble with the IRS. But avoiding back tax debt is the first step to be taken to avoid all that tax debt drama.