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
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
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
- 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
- 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
"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.
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
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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.
Media Outreach Specialist
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