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Can't pay your tax bill? You do have some options.

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What if I can’t afford to pay my taxes?

March 19, 2019

You thought you'd get a tax refund this year. Instead, you owe money, more than you can afford to pay by Tax Day. Don't panic, you do have options – some are better than others.

One option is to pay with a credit card. You do that on the IRS website. Keep in mind: There is a service fee of about 2 percent, and unless you can pay off the bill in full when it comes, you're going to pay interest on the balance.

Another way to go: Check with your bank or credit union about a personal loan. It should cost significantly less than carrying that balance on a credit card.

Or you could sign up for an installment plan with the IRS and pay over time.

"The IRS offers surprisingly helpful payment plans," said Andrea Coombes, tax specialist at NerdWallet, the personal finance website.

If you can pay off your bill in four months or less, it's free to apply for an installment plan at IRS.gov.

"You may face the IRS's failure to pay penalty of one-half of one percent, plus interest charges of about six percent," Coombes said, but if you can pay your bill in four months or less, this is a pretty convenient way to do it."

The bottom line: Even if you can't come up with all the money by April 15, you still need to file on time. The IRS penalty for failure to file is 5 percent of your unpaid balance per month. If you underpay the penalty is just one-tenth a percent.

So, pay as much as you can by Tax Day because you're going to be charged interest and penalties on the unpaid balance. Then, go on the IRS website and check out your various payment options.

More Info: What if I can't afford to pay my taxes?

Listen to Herb's interview with NerdWallet's Andrea Coombes.

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