Tax Time Strategies for IRS Debts

In a perfect world, taxpayers would withhold enough money to cover their federal income taxes. Unfortunately, the world isn't perfect and millions don't. Consequently, many Americans will be scrambling to meet this year's tax filing deadline.

"A surprise income tax bill can wreck an already strained budget," says Kim Womack, director of education for Consumer Credit Counseling Service of South Texas. CCCS is a non-profit community service organization that offers free debt and credit counseling and education. "Luckily, there is still time to do something about that bill."

Depending on the amount owed, many may be able to get their hands on enough money to pay their taxes in full by April 15. If not, taxpayers need to familiarize themselves with credit options and other strategies to address their tax bill. "The key is to take the initiative and develop a payment plan. Taxpayers who wait too long to act won't have as many options," said Womack.

If you think you may owe the IRS this year, CCCS offers the following tips:

1. Do your return early. When it comes to taxes, what you don't know can hurt you. You need to know how much you owe so you can start planning.

2. Start saving. Cut any unnecessary expenses from your budget. Food and entertainment costs are the most flexible areas. Make a goal to reduce spending by $50 a week or more.

3. Earn extra money. Inquire about overtime opportunities. Take a second job until tax bill is paid. Have a garage sale or sell that boat or extra vehicle.

4. Research your credit options. These include a bank or credit union loan, an IRS installment plan, or charging the debt to a major credit card. If you decide to borrow the money, shop around for the best rates and terms.

5. Always file. The IRS considers filing your tax return on time and paying your tax bill as two separate items. Even if you can't pay, file on time. There may also be volunteer tax preparation sites in your area to review returns and offer suggestions.

6. Correct tax problems. Many people with large tax bills simply didn't withhold enough from their paychecks during the year. Others may have sold stock and failed to budget for the capital gains tax. Some don't keep good records of deductible expenses. Fix these problem areas to reduce future tax liability.

7. Seek help. Treat your tax shortfall as a wake up call to get your finances in order. Debt counseling services like CCCS can help you budget for the monthly tax bill and develop a savings plan to address future tax debts and other annual expenses.

For help with money management or budgeting, CCCS is a nonprofit, community service organization that provides confidential counseling, guidance, debt management, and education programs to financially troubled consumers. CCCS of South Texas is a member of the National Foundation for Credit Counseling (NFCC). To schedule an appointment with a CCCS counselor, please visit www.cccsstx.org or call 800-333-4357.