Each year, the majority of workers who file a tax return wind up getting a refund as a result. But what if you’re among those folks who end up owing money to the IRS instead?
If you don’t submit that tax bill in full, you’ll incur interest and penalties on whatever amount remains unpaid, thereby making it even more expensive.
What happens, however, if you don’t have savings to access for that cash, or investments to liquidate?
Here are a few things you can do to drum up some money quickly — and avoid making your tax bill even more expensive.
1. Cut expenses in a big way
Many of your monthly bills are likely non-negotiable, like your rent or car payment and health insurance premium. But most of us have variable expenses in our budgets, and if you make an effort to slash those majorly between now and the tax deadline, you might free up a nice chunk of cash.
Imagine you typically spend $200 a month on leisure, another $200 on restaurants and takeout, and an additional $100 on rideshares. All of those expenses can be eliminated for a brief period of time, so go that route if you’re staring down a tax bill you can’t otherwise pay.
2. Get a side hustle
When you work full-time, taking on a second gig might not hold much appeal. But if you’re short on your taxes, working a side hustle temporarily could be just the thing that helps you scrounge up cash and avoid IRS penalties. If you’re not sure how to snag an additional job, think about the things you’re good at that other people might pay you to do.
If you excel at writing, for example, you might search for blogging or content projects online. If you’re great with animals, offer up your services as a dog-walker or cat sitter. And if you have a friend who manages a restaurant, store, or any other business, see if he or she needs someone to cover extra shifts.
Working even a few hours each week for the next month could put several hundred dollars back in your pocket (temporarily, of course, since you’ll be sending it to the IRS, but it’s better than racking up interest).
3. Sell things you no longer need
The good thing about tax season is that it coincides with spring cleaning, so if you’ve been putting off the latter task, taking inventory and selling items you don’t need is a good way to round up some money for your tax bill. You can list items for sale online, or even go old school and hold a yard sale one weekend.
4. Ask for an advance on earnings or a bonus
If you really don’t want to be late with your tax bill but don’t have the money to pay it, one final tactic you might utilize is asking your employer for an advance on incoming earnings, whether it’s your regular paycheck or a bonus or commission you’re due. If you have a good relationship with your employer and a decent employment history, your company might comply.
If, despite your best efforts, you’re unable to come up with the money to pay your tax bill, don’t despair. Generally, the IRS will work with you by agreeing to an installment plan that lets you pay that debt off over time.
Furthermore, resist the urge to put that tax bill on a credit card and pay it off later. In doing so, you’ll likely cost yourself more money than necessary.
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Source: The Motley Fool