Randolph Law Firm, P.C.

Different strategies to pay IRS tax debt when funds are tight

If a taxpayer in Nevada or elsewhere doesn't have money to pay his or her taxes by the April 15 deadline, what can be done? If a taxpayer obtains an extension to file, does that mean that he or she doesn't have to worry about doing anything? On the first question, send in the completed return to the IRS with partial payment or no payment, but include a note telling the agency that more time is needed.

With the extension, an estimate of taxes is due by April 15, even though the filled-in return and payment are not immediately required. One should then try and put aside enough funds for the extension deadline, instead of filing with not enough money and asking for a payment plan. Some other ways to solve the tight-money situation may include using a credit card, getting a personal loan, going to family and friends or seeking an equity line of credit.

These days, a popular tool is the reverse mortgage. Depending on how it is set-up, the fund can produce a regular monthly allotment of income or the homeowner can take out a lump-sum. There are no mortgage payments to the bank; instead, the bank pays the property owner and the property is not relinquished until the owner's death.

If one uses a credit card, the only hitch will be the sometimes exorbitant charges and fees that will have to be paid. A personal loan can work for those with good credit or with a solid family member to co-sign.  The taxpayer may be forced to take out an equity loan on his or her real estate.

However, the last method sucks up the equity in the taxpayer's home and results in two mortgage payments instead of one. A great rule to follow in Nevada or elsewhere is to never touch the equity in the home, at least not until it is an absolute emergency. If one enters into a plan for installment payments with the IRS, those plans under $10,000 will not be reported to the credit bureaus, so that this may be the most convenient way to go.

Source: stltoday.com, "4 Ways to Pay Your Taxes : Business", Gerri Detweiler, April 3, 2015

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