Unable to Pay Your Taxes? MoneyRates Shows the Routes to Take

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MoneyRates.com addresses taxpayers struggling to pay their tax bills amid the tax filing season. They emphasize the importance of filing on time to avoid penalties, which can escalate to 5% of the unpaid balance monthly. The IRS offers options like short-term and long-term payment plans and private loans for tax payment, including home equity loans and personal loans. Taxpayers should consider their circumstances, such as credit ratings and amounts owed, before choosing a payment method. Consulting a tax professional is recommended for managing owed taxes.

Positive

• Offers various payment options for taxpayers, including IRS payment plans and private loans.
• Resources available to guide taxpayers through the tax payment process.

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• Failing to file on time incurs a penalty of 5% of unpaid taxes monthly.
• Tax bills are difficult to erase even in bankruptcy.

FOSTER CITY, Calif., March 16, 2021 /PRNewswire/ -- Americans are in the throes of tax filing season and some may be worrying about the ability to pay their tax bill. Personal finance site MoneyRates.com offers suggestions and guidance to those struggling to pay Uncle Sam.

"Taxpayers should not panic if they find themselves in this situation," stresses Gina Pogol, MoneyRates' personal finance specialist. "While it can be scary, there are several options available to satisfy the IRS bill."

Find the new resource here: What to Do if You Can't Pay Your Taxes

Experts emphasize that regardless of the ability to pay, it is important to at least file on time. If not, file for an extension -- file first, angst later.

"Failing to file a tax return on time can be incredibly expensive," says Pogol. "The failure-to-file penalty is 5% of the unpaid balance per month until the taxes are filed."

What happens, when someone cannot pay their taxes?

Back taxes do not disappear and are not magically forgotten, so personal finance experts warn not to ignore them. When they are not paid, the IRS first sends a notice of demand for payment and should be contacted within ten days with a plan of action or the collection process is accelerated. The IRS can, in fact, seize assets that include wages, bank accounts, retirement income or real estate. The sooner the tax bill is addressed, the less painful and expensive the outcome will be.

"The IRS is tough, but not entirely unforgiving," says Pogol. "Keep in mind, though, that tax bills, just like government-backed student loans, are extremely difficult to erase even in bankruptcy."

The IRS bill: options to pay

The IRS offers several options to pay, which include full payment with a credit or debit card, a short-term payment plan, or a long-term payment plan. Some may qualify to apply online for an installment agreement, including owing less than $50,000 in combined tax, penalties and interest. Repayment plans require the money is taken automatically from the taxpayer's checking account or via a credit or debit card.

Other options for paying off the IRS include private loans such as:

• Home equity loan or line of credit
• Credit card
• 401(k) loan
• Personal loan

Which Way is Right for You?

This largely depends on circumstances such as  how much is owed, credit rating and income. 

Factors to consider:

• If the amount owed is relatively small and the taxpayer's credit is good, applying for a credit card with a zero percent introductory rate is a viable option. Pay as much as possible during the interest-free period, which is usually six to 24 months.
• An IRS plan may not be optimal if a large amount is owed. The agency generally charges about 6.2% interest.
• It's sometimes possible to borrow up to 50% of the balance from a 401(k) loan.

For those with good-to-excellent credit, MoneyRates explains that taxpayers may be able to get a better interest rate from a personal loan.

"Another way to minimize the payment is by combining a personal loan and credit card," adds Pogol. "Using a rewards card to pay the IRS can rack up travel miles and then taxpayers could pay off the card with a lower-interest personal loan. It's important to compare personal loan offers; interest rates vary widely."

Advantages of using a personal loan to pay for taxes:

• Paying late doesn't equal trouble with the IRS
• The interest rate is usually fixed and often lower than a penalty interest rate pending good credit
• The payment is controlled by choosing a loan term
• The ability to take advantage of favorable credit card offers such as rewards or zero interest
• Getting approved for an IRS plan takes longer than applying for a personal loan

"It's best to always consult a tax professional to avoid any trouble in the future," concludes Pogol.

Pogol is available to discuss options for paying back owed taxes and other personal finance planning issues. 

About MoneyRates
MoneyRates is owned and operated by QuinStreet, Inc. (Nasdaq: QNST), a leader in providing performance marketplace technologies and services to the financial services and home services industries. QuinStreet is a pioneer in delivering online marketplace solutions to match searchers with brands in digital media. The company is committed to providing consumers with the information and tools they need to research, find and select the products and brands that meet their needs. MoneyRates is a member of QuinStreet's expert Research and Publishing Division.

Since 1998, MoneyRates has served as a personal finance resource designed to help readers make the most of their money. In addition to a variety of financial calculators, MoneyRates.com researches and tracks CD, savings, and money market rates offered from over 400 financial institutions across the country to offer expert advice on banking, investing and retirement planning.

Twitter: @MoneyRates
Facebook: www.facebook.com/MoneyRatesdotcom

Media contact
Charlene Arsenault 
Media Outreach Specialist
carsenault@quinstreet.com
Direct +1-508-832-8918
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SOURCE MoneyRates.com

FAQ

What should I do if I can't pay my taxes in 2021?

MoneyRates.com provides guidance on options like payment plans and loans for taxpayers struggling to pay their tax bills.

What are the consequences of not filing taxes on time?

Failing to file can lead to a penalty of 5% of the unpaid balance per month until the taxes are filed.

How can I pay my tax bill if I owe less than $50,000?

You may qualify for an installment agreement with the IRS, allowing you to set up a payment plan.

What options does the IRS offer for tax payment plans?

The IRS offers full payment by card, short-term and long-term payment plans, and potentially an installment agreement.

Is it possible to use a personal loan to pay taxes?

Yes, a personal loan can be an option, especially for those with good credit.