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Tips For Paying the Taxman
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Have you finished your taxes yet? If you’re like many Americans, you will procrastinate as long as you can. In fact, one out of every three taxpayers will wait until the final weeks before the April 15 tax deadline to file. Calculating your taxes now doesn’t mean you have to file before the deadline, but it does give you time to prepare for the results.
If you find that you will owe taxes and are not sure how you will pay, the experts at Consumer Credit Counseling Services, a division of Money Management International, offer the following advice.
- Start saving. By brown bagging your lunch or reducing other daily expenses, you may be able to save as much as $100 a week. This would enable you to save more than $500 before the big day.
- File on time.The penalty for not filing on time is generally 5 percent of the balance due per month. The IRS recommends filing your taxes even if you are unable to pay. If you truly can’t get it done by April 15, file for an extension. For taxpayers hit hardest by Hurricane Katrina, the IRS is postponing taxpayer filing and payment deadlines. For more information, contact the IRS Disaster hotline at 1-866-562-5227.
- Pay on time. The interest charged on late payments is determined every three months and is the federal short–term rate plus 3 percent. During the last several years the interest rate has ranged from a high of 9 percent to a low of 4 percent.
- Get Help. There are many institutions – including the government – who will loan you the money for a price. To request a payment plan, complete Form 9465, Installment Agreement Request, and attach it to the front of your income tax return.
- Don’t compound the problem. Whatever you do, don’t be tempted to pay your taxes with a credit card; the last thing you want to do is roll your tax bill into a revolving credit card balance that you will still be paying on this time next year.
- Change your W-4. Contact your company’s personnel department to reduce the number of deductions you claim or have extra money withheld so that you won’t be hit with the same surprise next year.
To make filing your taxes easier, consider using the Electronic Federal Tax Payment System (EFTPS). The EFTPS enables tax preparers, businesses and individuals to pay federal taxes electronically using a variety of payment methods. For more information about the free service, visit www.eftps.gov.
Most importantly, include potential tax payments in your budget of expenses. Plan ahead to pay taxes just as you plan ahead to pay for holiday gifts, birthday celebrations, and more.
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