The Boston marathon kicked off this morning in Hopkinton with approximately 30,000 runners traversing the city to finish on Boylston Street. The 26.2 mile event makes it more difficult to get around the metro area. For this reason, it is fortunate that the tax filing due date in Massachusetts is tomorrow, April 19th.
Massachusetts residents and businesses are expected to pay the Federal government more than $100 billion in taxes. That is right – billion with a B. If you are one of the thousands who cannot pay your tax bill, we have three tips for you in this post.
File on time and pay as much as you can
Filing your tax return on time can save you money. The combined penalty for failing to file and pay the amount owed is 5 percent per month.
Paying as much as possible will help you minimize your late payment penalty. The late payment penalty is .5 percent for each month up to a maximum penalty of 25 percent, but it is based on the net amount you owe. Sending in a partial payment with your tax return will lower the amount of this penalty.
Look into a loan or credit card
The interest rate charged on tax debt is variable – the federal short term interest rate plus 3 percent. If you can obtain a loan or credit card with a lower interest rate, you will come out ahead.
Schedule a payment plan
Installment payment plans can be requested with your return. The IRS charges a user fee to set up an account, but will allow you up to five years to pay the balance.
The calculation of monthly payments can be affected by what you owe:
- An obligation of less than $25,000 will usually be based on the outstanding amount
- For a tax liability over $25,000, payments are usually determined by what you can afford.
Working with a tax attorney can ensure you receive the most advantageous installment plan. Similar options are also available to deal with Massachusetts state tax debt.
Source: Boston Globe, “How much federal tax will Mass. residents pay?,” Matt Rocheleau, Apr. 15, 2016