Tip For Paying Taxes With An IRS Loan
With the tax due date coming up fast, what do you do if you have a tax bill that you can't afford to pay? Your credit card may be your first thought, or possibly not filing at all (highly not recommended), but your best option if you don't think you'll be able to afford to pay the taxes you owe this year may be from a source that you never considered: the IRS. According to Smart Money:
First off, you should still file your 2005 return by April 17. Be sure to include Form 9465 (the Installment Agreement Request) with your return. On that form, you can suggest your own easy payment plan to the IRS. Assuming you owe less than $10,000 and are proposing to pay the total over 36 months or less, it's virtually automatic the IRS will accept.
Borrowing from the IRS will require:
A one time set up fee of $43 Interest on your deferred payments (currently 7%) A monthly 0.25% "failure to pay" penalty
When combined, that adds up to approximately a 10% interest rate plus the $43 fee -- which is likely a much better rate than you'll get from your credit card, especially when the IRS credit card convenience fee is added in. Even though it will cost you some money to go this route, it's far better than the fees you'll incur for not filing your taxes at all if you find yourself in the position of not knowing where to get the money to pay for the taxes you owe.