What To Do When You Owe but Can’t Pay Taxes

April 7, 2011  |  

(New York Times) — What if you’re strapped for cash and can’t pay the full amount due at the bottom of your I.R.S. Form 1040?  You can ask the Internal Revenue Service for extra time to pay — and can even apply for an installment plan, to pay off the debt over several years. But it’s questionable whether that’s a smart move.  The government tacks on failure-to-pay penalties, enrollment fees and interest charges that compound monthly, and they can add up to as much as 25 percent of the tax owed. In fact, the I.R.S. itself suggests that it’s often better for filers to pay their balance up front with a cash advance from a credit card or a bank loan, because the repayment amount would be smaller.

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