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Taxes

Can't afford to pay your taxes? Here are your options

The IRS offers payment plans, but they come at a cost. Here's what you need to know.

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Select’s editorial team works independently to review financial products and write articles we think our readers will find useful. We earn a commission from affiliate partners on many offers, but not all offers on Select are from affiliate partners.

Many have been in this scenario: You file your taxes using an online tax software, paper filing or an accountant, and after entering all of your numbers (and double checking them for accuracy), you're hit with a fact you've been dreading — you owe the government money.

Fortunately, the IRS accepts a variety of payment methods, from good old-fashioned paper checks to debit and credit cards. Just be sure to consider all the fees when you pay taxes with a credit card. But what happens when you can't afford to pay your tax bill in one big lump sum?

Select details your options for paying your tax bill over time, and what you need to know about payment plans through the IRS.

Paying your taxes over time

In 2022, the deadline to file your 2021 taxes is Apr. 18. And even if you're afraid you won't be able to afford paying your taxes, it's better to file and set up a payment plan than to avoid filing entirely. This could lead to interest and penalties.

So if you get the dreaded news of owing Uncle Sam, here are your options of extended payment plans:

Short-term payment plan fees (180 days or less)

After applying for a short-term payment plan, you can pay the amount owed directly from your checking or savings account (Direct Pay) or by check, money order or debit/credit card. Here are the fees you'll pay with the short-term payment plan:

  • $0 setup fee
  • Interest until the balance is paid in full
  • Penalties for non-payment up to a maximum of 25% unpaid tax amount until balance is paid in full

Learn more about IRS interest and penalties.

Long-term payment plan fees

Long-term option A: Monthly automatic withdrawals

With this plan, you pay a set monthly amount through automatic withdrawals, similar to an installment loan. It's the least costly of the long-term plans. These are the fees associated with the long-term payment plan via monthly automatic withdrawals:

  • $31 setup fee (if you qualify as low income, the setup can be fee waived)
  • Interest until the balance is paid in full
  • Penalties for non-payment up to a maximum of 25% unpaid tax amount until balance is paid in full
  • Applicable card transaction fees

Learn more about IRS interest and penalties.

The payments accepted with this plan are more limited, with just one option called the Direct Debit Installment Agreement (DDIA). This is essentially an authorized debit withdrawal from your checking account, and it's required for this plan.

Long-term option B: Pay each month (non-Direct Debit)

This option doesn't require setting up DDIA, giving you more flexibility. But it will cost you more in fees:

  • $130 setup fee (if you qualify as low income: $43 setup fee that may be reimbursed if certain requirements are met)
  • Interest until the balance is paid in full
  • Penalties for non-payment up to a maximum of 25% unpaid tax amount until balance is paid in full
  • Applicable card transaction fees

After applying for this plan, you'll pay the the taxes you owe via non-Direct Debit (not automated) monthly payments, including payments directly from your checking or savings account (Direct Pay) or by check, money order or debit/credit card.

Other options to pay your taxes over time

The IRS charges set-up fees for those who need to pay their taxes over time. But there might be more affordable options, such as using a 0% APR credit card to pay your tax bill or even taking out a personal loan.

When comparing costs, calculate how much the interest and fees will cost you over time. But if your credit score is good enough to qualify you for either a 0% interest credit card or personal loan, you should do the math to find out which payment option is cheaper. Then choose the one that costs the least over time and has a monthly payment you can afford.

If a 0% interest credit card is a viable option for you, and once you're approved for the card, the next step is to visit this IRS webpage and pick a payment servicer. Pay1040 charges a fee of 1.87% to use a credit card to pay taxes, and the rewards from some credit cards can even negate this fee.

Here are a few of our best picks for 0% APR credit cards and personal loans.

U.S. Bank Visa® Platinum Card

On U.S. Bank's secure site
  • Rewards

    None

  • Welcome bonus

    None

  • Annual fee

    $0

  • Intro APR

    0% for the first 20 billing cycles on balance transfers and purchases

  • Regular APR

    15.24% - 25.24% (Variable)

  • Balance transfer fee

    Either 3% of the amount of each transfer or $5 minimum, whichever is greater

  • Foreign transaction fee

    2% to 3%

  • Credit needed

    Excellent/Good

See rates and fees and our methodology, terms apply.

Pros

  • 20 billing cycles of no interest on balance transfers and purchases
  • No annual fee
  • Cell phone protection plan

Cons

  • No rewards program
  • 2% to 3% foreign transaction fee
  • Balances must be transferred within 60 days from account opening

Citi® Double Cash Card

On Citi's secure site
  • Rewards

    2% cash back: 1% on all eligible purchases and an additional 1% after you pay your credit card bill

  • Welcome bonus

    No current offer

  • Annual fee

    $0

  • Intro APR

    0% for the first 18 months on balance transfers; N/A for purchases

  • Regular APR

    14.74% - 24.74% variable on purchases and balance transfers

  • Balance transfer fee

    For balance transfers completed within 4 months of account opening, an intro balance transfer fee of 3% of each transfer ($5 minimum) applies; after that, a balance transfer fee of 5% of each transfer ($5 minimum) applies

  • Foreign transaction fee

    3%

  • Credit needed

    Good/Excellent

See our methodology, terms apply.

Pros

  • 2% cash back on all eligible purchases
  • Simple cash-back program that doesn't require activation or spending caps
  • One of the longest intro periods for balance transfers at 18 months

Cons

  • No welcome bonus, so you can’t maximize rewards during the first few months of card opening
  • Minimum cash-back redemption of $25
  • 3% fee charged on purchases made outside the U.S.
  • Estimated rewards earned after 1 year: $443
  • Estimated rewards earned after 5 years: $2,213

Amex EveryDay® Credit Card

Information about the Amex EveryDay® Credit Card has been collected independently by CNBC and has not been reviewed or provided by the issuer of the card prior to publication.
  • Rewards

    2X Membership Rewards® points at U.S. supermarkets on up to $6,000 per year in purchases (then 1X), 1X Membership Rewards® points per dollar spent on all other purchases

  • Welcome bonus

    Earn 10,000 Membership Rewards® points after you make $2,000 in purchases in your first 6 months of card membership

  • Annual fee

    $0

  • Intro APR

    0% for the first 15 months on purchases from the date of account opening, N/A for balance transfers

  • Regular APR

    13.74% to 24.74% variable

  • Balance transfer fee

    N/A

  • Foreign transaction fee

    2.7%

  • Credit needed

    Excellent/Good

See rates and fees and our methodology, terms apply.

Pros

  • No annual fee
  • Competitive intro period on purchases
  • 20% extra point bonus when you make 20 or more purchases in a billing period

Cons

  • 2.7% foreign transaction fee

LightStream Personal Loans

  • Annual Percentage Rate (APR)

    3.49% to 19.99%* when you sign up for autopay

  • Loan purpose

    Debt consolidation, home improvement, auto financing, medical expenses, wedding and others

  • Loan amounts

    $5,000 to $100,000

  • Terms

    24 to 144 months*

  • Credit needed

    Good

  • Origination fee

    None

  • Early payoff penalty

    None

  • Late fee

    None

Terms apply.

Upstart Personal Loans

  • Annual Percentage Rate (APR)

    3.09% to 35.99%

  • Loan purpose

    Debt consolidation, credit card refinancing, wedding, moving or medical

  • Loan amounts

    $1,000 to $50,000

  • Terms

    36 and 60 months

  • Credit needed

    FICO or Vantage score of 600 (but will accept applicants whose credit history is so insufficient they don't have a credit score)

  • Origination fee

    0% to 8% of the target amount

  • Early payoff penalty

    None

  • Late fee

    The greater of 5% of monthly past due amount or $15

Terms apply.

Still waiting to file? The tax deadline is approaching

There's just about one month left to file taxes on time without penalty, with the April 18 deadline just around the corner. As many as 90% of taxpayers file electronically, since it's faster, easier and more convenient.

Select reviewed 12 tax filing programs that can help you file your taxes faster. We evaluated them on a range of features, including cost, user experience, expert tax assistance and Better Business Bureau rating.

Here are the best tax filing programs:

Bottom line

Paying your tax bill is never a great feeling, especially if you're on a strict budget. However, there are options to stretch out your payments to minimize the impact on your monthly budget.

If your yearly tax bill is higher than expected, you may want to consider adjusting your tax withholding with your employer, or consider paying quarterly taxes if you're self-employed.

Information about the Amex EveryDay® Credit Card has been collected independently by Select and has not been reviewed or provided by the issuers prior to publication.

For rates and fees for the Amex EveryDay® Credit Card, click here

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.