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Understanding Tax Extension Forms

        Money | Taxes

What If You Can't Pay Your Taxes?
Credit cards could prove to be a viable option for paying your taxes in a pinch, but watch out for fees.
Credit cards could prove to be a viable option for paying your taxes in a pinch, but watch out for fees.
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If you're seeking an extension because you can't pay your taxes, the IRS recommends filing and paying what you can by April 15 instead. There are no payment extensions, and the penalty that occurs when you fail to pay will only increase your bill.

The IRS offers payment options for those in a financial bind. Those owing less than $50,000 in tax and interest can file an Online Payment Agreement application to make installment payments over time. Taxpayers owing more than $50,000 need to file Form 433F, the Collection Information Statement. You can learn more about these options or negotiate some other sort of plan by contacting the IRS directly [source: IRS].

There can be advantages to using a credit card to pay a tax bill rather than risking late-payment charges and interest. If the card has a low interest rate, offers reward points and can be paid back in a timely way, a credit card is a viable and even attractive option [source: Karimi]. Just be aware that IRS payment processors charge fees for both debit and credit payments. Debit cards incur flat fees of less than $3, but credit cards can incur a fee as high as 2.35 percent of the taxes you owe [source: IRS].

To prevent hefty tax bills in the future, it's easy to change the amount withheld from your paycheck. By reducing the amount of total exemptions and withholdings, you can increase your regular tax payments to the IRS. Most payroll providers allow employees to change withholdings directly on the web. You also can contact a human resources representative to discuss the process.


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