While tax season is never fun, if you end up owing taxes you can’t afford to pay, it gets even worse. When brainstorming ways to pay what you owe, you might want to consider a personal loan. Using a personal loan brings a lot of positives with it that can make it a good option when you lack the cash to pay your taxes.
What Happens if You Don’t Pay Your Taxes
The IRS is unrelenting when it comes to collecting taxes. If you owe taxes and can’t pay or you decide not to file at all, there are serious consequences.
1.) Defaulting on your taxes costs you more – You might be thinking that you can file but just skip paying your taxes, but the IRS tends to take a dim view of such things. First, the IRS will start charging you interest on the unpaid balance of your taxes on April 15th (April 17 is tax day in 2017). The rate applied will be equal to the federal short-term rate plus an additional 3 percent. In addition, there can be other penalties added, and in extreme cases, you could be charged with a crime.
2.) Not filing at all is dangerous – If you don’t file at all, the penalties are quite high. The IRS will start with charging you interest on what you owe, and then start charging you penalties on top of that. They will also charge you a failure-to-file penalty. This is normally 5 percent of the total tax you own each and every month. Before long, your interest and penalties can be more than your original tax bill.
Reasons You Should Consider Using a Personal Loan to Pay Taxes
There are a couple of good reasons that make using a personal loan a good idea when it comes to paying your taxes. These include the following:
1.) The interest rate on a personal loan is less – If you go ahead and file your taxes but don’t pay them, then you are typically looking at about 4.24 percent interest being charged on your unpaid balance by the IRS. Many personal loans have a lower interest rate, so it makes sense to apply for a personal loan to pay taxes and save money on the interest you will be paying. In addition, you won’t have the IRS breathing down your neck.
2.) An IRS payment plan is a negative on your credit score – Even if you go ahead and make a payment plan with the IRS to pay your taxes, it will be reported to the credit agencies and will hurt your credit score. A personal loan, however, is not a negative as it is simply a loan and isn’t associated with non-payment of other obligations.
Also, if you default on your payment plan with the IRS, they have the ability to garnish your bank accounts, your wages, and even your Social Security benefits. This is not a situation you want to find yourself in.
While owing taxes you can’t pay is a stressful place to be, you do have options that allow you to pay your taxes and keep yourself in good standing with the IRS. A personal loan will allow you to meet your obligation as well as keeping your credit score intact and maybe, most importantly of all, it will allow you to get a good nights sleep without the nightmare of owing back taxes to the IRS.
This information was brought to you by BetterLoanChoice
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