Are you Ready to Pay your Taxes?
It seems incredible to me that tax season is here already. Wasn't it just Christmas a few days ago?
Being the money geek I am, I've already finished my taxes and mailed off $1,400 to Uncle Sam. Those payments sting a little bit, but fortunately I had some money from a holiday bonus to help pay it off. Inversely, my boyfriend always waits until April 14th to complete his filings!
Are you prepared for the sting of tax season? If you are not sure what you'll owe or get in returns this year, take a few minutes to do a quick tax estimate using this free MSN tool. If you need to write a check to the IRS this year, now is the time to think about where that money is going to come from. Let's evaluate tax payment options:
Cash - Paying your taxes directly from your checking account is certainly the simplest and cheapest option. However, be sure to check your balances and consider the impact before you sign the check. If paying your taxes with cash is going to leave you unable to pay your rent, mortgage, credit card bills, etc. consider other options. Also, remember that it can take a while for your check to be processed by the tax agencies.
Savings - Reaching into a savings account can be a smart move for paying taxes. Just be sure that you won't have to pay any special penalties or fees for the withdrawal. It can take a few days to transfer your savings to your checking account so don't wait until April 14th if you want to use this method. Avoid tapping 401(k) or IRA accounts for your taxes.
Credit Card - Taxpayers may be tempted to use a credit card for the simplicity, extended repayment period and rewards points. But those benefits are quickly lost when credit card processors charge you a 2.49% to 3.93% convenience fee for the transaction. Suddenly, that 1% cash back offer doesn't seem so appealing.
Installment Plan - The IRS offers an installment plan for consumers who can't afford to pay their balance in full. It's not cheap though: you'll be charged $105 ($52 if you are paying electronically) for a set up fee and $45 for a user fee along with a 5% interest rate and 1% monthly no-payment penalty. Even the IRS clearly explains that this installment plan isn't a great deal.
Personal Loan - Personal loans from your bank, credit union or online allow you to borrow up to $15,000 fairly affordably. A private personal loan may offer lower fees and more flexibility than the IRS installment plan. However, taxpayers with bad credit may have trouble being approved and could actually be better off with the IRS program.
Family Loan - Can a parent or relative help loan you the money you owe? If so, you might want to make the loan official using a program like Circle Lending. This system helps you manage a loan between relatives and removes a lot of the emotional landmines that come when you blend family with money.
Extra Earnings - If you know that you're going to owe some money in April, see if you can increase your income by working overtime, taking on a temporary second job or accepting more hours. Even holding a garage sale or selling a few things on eBay could help you gather the cash you need for your taxes.
How do you plan on paying for your taxes this year? Share your tips and feedback in the comments section below.
Me gustaria que me enviara la informacion , en espanol por favor. quiero saber mas de el IRS.
GRACIAS
Posted by: cilda | March 07, 2007 at 05:07 PM
Encontré algunas recursos para usted:
http://www.irs.gov/espanol/index.html
Toll-free hotline: 800-829-1040
California: http://www.ftb.ca.gov/aboutFTB/help_sp.html
Posted by: Emily Davidson | March 07, 2007 at 05:22 PM