In our last blog post, we discussed the payments due each year's April 15. But if you don't have money to cover all the payments, how do you prioritize your payments?
You can follow the steps below to send the payments!
Step one
Fund your 2013 IRA. April 15 is the absolute deadline you may fund the accounts for prior year's contribution. In addition, some people who fund their IRAs will also qualify for a Retirement Savers Credit — and get back up to $1,000 of their contribution ($2,000 married filing jointly).
Step two
Pay your current year estimated tax payments as much as you can, only leave a few hundred dollars for the next step. You may wonder why not paying as much as possible of last year’s taxes and stop the interest and penalties that are accruing? See explanation below.
Step three
Put your prior year's owed taxes on extension. Pay as much of last year’s taxes as you can afford to pay with the extension — even if it’s only $50 each to the IRS and state.
So, why are we only paying a small part of this with the money we have left? Because if you are going to need an installment agreement, neither the IRS nor the state will give you one if you are not “in compliance” for the current year. In other words, if you were bad last year, they’re not willing to help you out if you’re not showing a good-faith effort to be good this year.
Extension to Pay Back Tax
What happens when you only pay a part of last year’s taxes and you still owe a big chunk? First of all, the extension gives you six months to raise the money to pay prior year’s taxes. That’s a lot of time. You can get a second job, sell off securities if you have them, or borrow money.
What if everything you do still brings you up short? Not a problem. As long as you’ve been keeping up your withholding and/or estimated tax payments for the year, you can ask the IRS and state for an installment agreement. In most cases (under $50,000 balance), the IRS will give it to you automatically, via an online application.
You can follow the steps below to send the payments!
Step one
Fund your 2013 IRA. April 15 is the absolute deadline you may fund the accounts for prior year's contribution. In addition, some people who fund their IRAs will also qualify for a Retirement Savers Credit — and get back up to $1,000 of their contribution ($2,000 married filing jointly).
Step two
Pay your current year estimated tax payments as much as you can, only leave a few hundred dollars for the next step. You may wonder why not paying as much as possible of last year’s taxes and stop the interest and penalties that are accruing? See explanation below.
Step three
Put your prior year's owed taxes on extension. Pay as much of last year’s taxes as you can afford to pay with the extension — even if it’s only $50 each to the IRS and state.
So, why are we only paying a small part of this with the money we have left? Because if you are going to need an installment agreement, neither the IRS nor the state will give you one if you are not “in compliance” for the current year. In other words, if you were bad last year, they’re not willing to help you out if you’re not showing a good-faith effort to be good this year.
Extension to Pay Back Tax
What happens when you only pay a part of last year’s taxes and you still owe a big chunk? First of all, the extension gives you six months to raise the money to pay prior year’s taxes. That’s a lot of time. You can get a second job, sell off securities if you have them, or borrow money.
What if everything you do still brings you up short? Not a problem. As long as you’ve been keeping up your withholding and/or estimated tax payments for the year, you can ask the IRS and state for an installment agreement. In most cases (under $50,000 balance), the IRS will give it to you automatically, via an online application.
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