If you’re going into tax season knowing that you’re going to end up with a balance owed to the IRS, you may also be worrying about how you’re going to pay what you owe. Fortunately, there are a few options that you can explore in order to satisfy your tax debts.
Consider a No-Interest Credit Card
One option for dealing with your tax payments is to put the balance on your credit card. However, keep in mind that you can’t pay the government directly with a credit card. Instead, your payment has to go through a third-party service, which will charge you a convenience fee of approximately 2%. Next, your best bet is to open a new card with an introductory 0% APR. Then, transfer your tax payment balance from the third-party service to your new credit card. You will have to pay a 3% balance transfer fee, but then you will have a time period where you don’t have to pay any interest. Usually, this is a 12-month period. So, make a monthly plan and pay off your balance within this time frame, or else your interest charges will negate any savings you’ve made.
Set Up an Installment Agreement
Applying for an installment agreement is a great option for those who cannot afford to pay their tax bills in their entirety, but it does come with some costs. For starters, there is a fee to set up the agreement, and you will have to pay accrued penalties and interest until the balance is paid off. Ultimately, this option may cost more, but it will allow you to pay a more manageable sum each month.
Still unsure? Let the tax help pros at Taxation Solutions, Inc. help you determine the best way to pay off your tax debt. Give us a call for a consultation!