Smart TaxesSmart Taxes

Can't pay your taxes? Come up with a game plan

If you've sketched out your tax situation and it makes you want to try and forget it until April, we have some better options.

By Money Staff Feb 7, 2014 12:50PM

This post comes from Christine DiGangi at partner site Credit.com.


Credit.com on MSN MoneyAs much as we'd all like a refund this tax season, not everyone gets money back from the IRS. If you're not prepared for it, owing money on your taxes can seriously stress your budgets and, potentially, your credit.


Worried man © CorbisIf you're not sure whether you'll owe or be owed, there's no better time than now to get started on your taxes. There are advantages to filing early, but if you get started and realize you're going to have to spend a little extra come April, at least you have some time to come up with a game plan.


Figure out what you owe

Perhaps you've been getting a little bit more mail lately — start sorting through any tax forms you may have received from employers, financial institutions or healthcare providers in the past few weeks, follow up with anyone who should be sending you one and look into any deductions you need to prepare to claim.


It's best to approach deductions as a yearlong process (take note of business expenses, make charitable donations here and there), which is all the more reason to get going if you haven't started yet. Keep an eye out for one of the most loathed tax forms of all, the 1099-C. If you had an outstanding debt canceled in the past, you may receive a form demanding you pay taxes on it. Though you may have to pay, there are also some situations in which you may not owe that money.


Once you have everything collected, start doing the paperwork, for which you can use one of a variety of free and subscription services. You can go the paper-and-pen route with all those forms you collected, or you can use an online service that allows you to save your progress and file when you're ready. When you get to the point of figuring out what you owe the IRS or how much you will get back, you should consider your next steps.


Explore payment options

There are many ways to send money to the IRS and get that pesky tax bill taken care of. If you can afford to absorb your tax payment into your regular budget or savings, you can send a check or transfer the money from a bank account. It's no fun to bear the extra expense, but it's a good thing to avoid going into debt over taxes.


Should your bill be more than you can reasonably expect to pay in full by April 15, you can consider paying on a credit card or taking out a personal loan to cover the cost. The key in both these scenarios is to use a product that minimizes the amount of interest you'll incur, so make your choices wisely. Yes, adding to your credit card debt may hurt your credit utilization ratio (thus negatively affecting your credit scores), and taking out a personal loan results in a hard inquiry on your credit reports (another small ding), but not paying the IRS could result in a tax lien down the road. Paying off those debts should be a top priority once you've satisfied your tax obligations.


There's also the option of entering an installment agreement with the IRS — it's setting up a monthly payment plan until you've paid the full amount you owe the IRS.


The non-option is to not pay: Failing to pay your taxes will result in a tax lien on your credit reports, which is a huge negative and can cause your credit scores to fall off a cliff. We're talking about a 100-point or so drop, depending on your credit standing. Once you've paid it, the lien stays on your credit reports for seven years -- however, you can request in writing that the IRS remove it once it's paid. Ultimately, though, it's best to spare yourself the credit misery and figure out a way to pay.

Decide on a plan

Each of your options presents different consequences for your credit profile, so you'll want to have a good grasp on where you stand before you file. You should check your credit reports regularly to make sure everything is accurate. And looking at your credit scores will show you how your behaviors have impacted your creditworthiness.


For example, if you look at your free Credit Report Card and see low credit scores, you may not have the option of getting a personal loan or low-interest credit card in order to pay your tax bill. Or maybe you'll see that your credit utilization is low, but find that by paying your taxes with your credit card (therefore increasing your utilization rate), you may negatively affect your credit scores. As you go through the process of paying your debt to the IRS, you can monitor how your progress translates into credit score changes, allowing you to make educated financial decisions in other areas of your life.


Look ahead

Now that you have a plan for paying your taxes, start thinking about the future. You may want to adjust how much you have withheld from your paycheck for taxes, or perhaps you need to add more to your savings as the year goes on so you can afford to pay your taxes in full next year. It also helps to take the fresh experience of preparing to file your taxes (aka the joyous task of collecting and filling out paperwork), and use it as motivation to keep track of things as the year goes on, so next year's tax season is less stressful.


More from Credit.com:


VIDEO ON MSN MONEY

84Comments
Feb 7, 2014 2:42PM
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Bob: "Did you hear about the Obama administration scandal?"
Bill: "You mean the Mexican gun running?"

Bob: "No, the other one."
Bill: "You mean SEAL Team 6 Extortion 17?"

Bob: "No, the other one."
Bill: "You mean the State Dept. lying about Benghazi?"

Bob: "No, the other one."
Bill: "You mean the voter fraud?"

Bob: "No, the other one."
Bill: "You mean the military not getting their votes counted?"


Bob: "No, the other one."
Bill: "You mean the president demoralizing and breaking down the military?"

Bob: "No, the other one."
Bill: "You mean the Boston Bombing?"

Bob: "No, the other one."
Bill: "The NSA monitoring our phone calls, emails & everything else?"

Bob: "No, the other one."
Bill: "You mean the president wanting to kill Americans with drones in our own country without the benefit of the law?"

Bob: "No, the other one."
Bill: "Giving 123 Technologies $300 Million and right after it declared bankruptcy it was sold to the Chinese?"

Bob: "No, the other one."
Bill: "You mean the president arming the Muslim Brotherhood?"

Bob: "No, the other one."
Bill: "The IRS targeting conservatives?"

Bob: "No, the other one."
Bill: "The DOJ spying on the press?"

Bob: "No, the other one."
Bill: "Sebelius shaking down health insurance executives?"

Bob: "No, the other one."
Bill: "Giving SOLYNDRA $500 MILLION DOLLARS and right after they declared bankruptcy 3 months later the Chinese bought it?"

Bob: "No, the other one."
Bill: "The NSA monitoring our phone calls, emails and everything else?"

Bob: "No, the other one."
Bill: "The president's ordering the release of nearly 10,000 illegal immigrants from jails and prisons and falsely blaming the sequester?"

Bob: "No, the other one."
Bill: "The president's threat to impose gun control by Executive Order in order to bypass Congress?"

Bob: "No, the other one."
Bill: "The president's repeated violation of the law requiring him to submit a budget no later than the first Monday in February?"

Bob: "No, the other one."
Bill: "The 2012 vote where 115% of all registered voters in some counties voted 100% for Obama?"

Bob: "No, the other one."

Bill: "The president's unconstitutional recess appointments in an attempt to circumvent the Senate's advise-and-consent role?"

Bob: "No, the other one."
Bill: "The State Department interfering with an Inspector General investigation on departmental sexual misconduct?"

Bob: "No, the other one."
Bill: "HHS employees being given insider information on Medicare Advantage?"

Bob: "No, the other one."
Bill: Clinton, the IRS, Clapper and Holder all lying to Congress?"

Bob: "No, the other one."
Bill: "I give up. Oh wait, I think I got it! You mean the 65 million brain-dead voters who stuck us again with the most corrupt administration in American history?"

Bob: "THAT'S THE ONE!"
Feb 7, 2014 2:44PM
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LBJ:
We were attacked (in the Gulf of Tonkin)
 
Nixon:
I am not a crook
 
GHW Bush:
Read my lips - No new taxes
 
Clinton:
I did not have sex with that woman... Miss Lewinski
 
GW Bush:
Iraq has weapons of mass destruction
 
Obama:
I will have the most transparent administration in history.
The stimulus will fund shovel-ready jobs.
I am focused like a laser on creating jobs.
The IRS is not targeting anyone.
It was a spontaneous riot about a movie.
If I had a son.....
I will put an end to the type of politics that "breeds division, conflict and cynicism".
You didn't build that!
I will restore trust in Government.
The Cambridge cops acted stupidly.
The public will have 5 days to look at every bill that lands on my desk
It's not my red line - it is the world's red line.
Whistle blowers will be protected in my administration.
We got back every dime we used to rescue the banks and auto companies, with interest. 
I am not spying on American citizens.
ObamaCare will be good for America 
You can keep your family doctor.
Premiums will be lowered by $2500.
If you like it, you can keep your current healthcare plan
It's just like shopping at Amazon
I knew nothing about "Fast and Furious" gun-running to Mexican drug cartels
I knew nothing about IRS targeting conservative groups
I knew nothing about what happened in Benghazi
I have never seen my Uncle from Kenya who is in the country illegally and that was arrested and told to leave the country over 20 years ago
And, I have never lived with that uncle. (He finally admitted today, [12-05-2013] that he DID know his uncle and that he DID live with him.)
 
And the biggest one of all:
"I, Barrack Hussein Obama, pledge to preserve, protect and defend the Constitution of the United States of America."
Feb 7, 2014 3:18PM
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if you dont pay your taxes then you can go by the name of "Mr Senator" or atttorney general
Feb 7, 2014 2:43PM
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ONE HABIT NOT MENTIONED:

DO NOT CHEAT ON YOUR TAXES!!!!!           YOUR GOVERNMENT NEEDS ALL OF YOUR MONEY!!!!

IT HAS SO MANY MOUTHS TO FEED!!!!   AND BUY CELL PHONES FOR!!!   AND POT TO SUPPLY!!!!

AND GUNS FOR POOR MEXICAN DRUG DEALERS!!!!     AND COFFINS TO BUY FOR OUR FOREIGN AMBASSADORS!!!!!       DON'T FORGET THE AD CAMPAIGN FOR OBAMACARE!!!!!!!

HEAVEN FORBID NOT PAYING CGI FOR THEIR TIRELESS EFFORT TO GET YOU ALL SIGNED UP FOR OBAMACARE!!!!!

AND SIMPLY JUST TOO MANY OTHER THINGS TO MENTION!!!!!
-------------------------------------------------------------------------------------------------


THE ONLY LEGACY OBAMA HAS CREATED FOR HIMSELF AS OF TODAY
IS:

HE HAS BROUGHT NEW DEFINITION DESCRIPTIONS TO THE WORD FAILURE!!!!!


Feb 7, 2014 2:41PM
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NOW THAT OBAMA HAS PROVEN HIMSELF TO BE A LIAR SINCE WAY BACK WHEN!!!

I FEAR THAT THE REAL DANGER IS NEVER FINDING OUT HOW MANY LIES HE HAS REALLY TOLD!!!!!!!!!


 "The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the US Government cannot pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government's reckless fiscal policies. Increasing America's debt weakens us domestically and internationally. Leadership means that, 'the buck stops here.' Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better."
   ~ Senator Barack H. Obama, March 2006


"PERIOD"
Feb 7, 2014 4:17PM
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I don't want a refund at all--it's MY MONEY--and I don't want the gov'ment to have it ahead of time.  I make a game of seeing just how close to $0 I can get the amount still owed.  This year, I was only off by $324.  I'll wait until the very last moment to send the gov'ment the $324 :)
Feb 7, 2014 4:05PM
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The average worker has no chance...you need to sit on your ****, not work and collect all the benefits you can...this is the way it works...people like you and me, show up every day to take care of the lazy a-holes...sometimes I wonder what will happen when the cash runs out....stock up on ammo and canned goods now.
Feb 7, 2014 2:35PM
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Obama is going to keep all your refund to pay your Obama care. .Yea vote for them again..  
Feb 7, 2014 2:41PM
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OUR LIVES HERE IN AMERICA ARE PARALLELING THAT OF OUR BELOVED COMPUTER SYSTEMS!!!

OUR GOVERNMENT - - -  GARBAGE IN = GARBAGE OUT!!!

OUR POPULATION - - -  GARBAGE IN = GARBAGE OUT!!!

OBAMACARE = GARBAGE IN = GARBAGE OUT!!!!!

OUR FUTURE?? - -  YOU FIGURE IT OUT!!!!!


Feb 7, 2014 2:53PM
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Easy way to figure out you owe in taxes.  Look at the white house, if you see a flaming liberal as president in office, then you will owe more this year.
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If you don't pay your taxes, it just means that you are a liberal democrat ............. but if you can't pay your taxes and you are a  conservative ......... well, that would make you just plain greedy!
Feb 7, 2014 2:40PM
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MANY FOLKS WILL FOLLOW JESSE JACKSON JR. !!!!!

THEY'LL JUST STEAL RATHER THAN WORK TOO MUCH OR PAY TAXES!!!!!
Feb 7, 2014 5:42PM
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Call Obama, he'll bail ya out!  He's helped rack it up to the tune now of 17.2TRILLION!!  What's a little more amongst friends?
Feb 7, 2014 2:34PM
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2 things in life you can't excape, Death and Taxes.  Death is questionable...
Feb 7, 2014 9:15PM
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"Washington, D.C., will never voluntarily relinquish meaningful power—no matter who is elected,". "The only rational conclusion is this: unless some political force outside of Washington, D.C., intervenes, the federal government will continue to bankrupt this nation, embezzle the legitimate authority of the states, and destroy the liberty of the people. Rather than securing the blessings of liberty for future generations, Washington, D.C., is on a path that will enslave our children and grandchildren to the debts of the past. The problem is big, but we have a solution."
Sen. , R-Okla., plans to push for a constitutional convention after he retires in the hopes that the drafting process would produce a smaller federal government.
Or you could just come to the realization that our presidents and leaders have been gunned down, our agencies manipulated to look the other way, and there will be no political solution. If thats the case prepare for war because these A-$-$-H-O-L-E-S WILL NEVER GIVE UP WHAT THEY'VE STOLEN FROM US WITHOUT A WAR. The only thing they understand is ABSOLUTE BRUTAL FORCE. 
Feb 7, 2014 3:44PM
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Then you are one of the 47% that I have to support through MY hard work.
Feb 7, 2014 3:14PM
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My BF just got hit with a HUGE settlement via BofA over a house that he lost in foreclosure due to job loss.  He is going to owe capital gains tax on the amount-after a bankruptcy and going broke!  Meanwhile BofA continues to rake in the dough by raking Americans over the coals.  And our bought and paid for 'leaders' bail THEM out. 
Feb 7, 2014 4:25PM
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The 16th amendment never really pasted and no where does it say you have to pay taxes, if you take them to court the first thing to ask is what law am I breaking?  We did not say rob us and feed your own pockets to the elected, so tell them to live as we do or vote them out.
Feb 7, 2014 4:27PM
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The IRS has a rule they ask you what you made and tell you to send it in. IRS will work with you on payment plan even if your behind bars If farmers are paid not to raise crops,why can't we pay Congress not to raise taxes (sorry we do that already) Good day tax collector.
Feb 7, 2014 8:44PM
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The IRS people are not to blame for your taxes.  They only collect them.  Don't be mad at them.  Go after the clowns who make the laws that take so much from you in taxes.  That is the idiots in CONgress!  And the one in the white house.  From there, go after your state cronies, your state legislature and your governor.  From there, go after your local people.  The city and county commissioners.  But, dont think you can vote them out!  The 6% between the 47% and the 53% will keep them in office. But, you can tell them how you feel. 
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