February 26, 2019, 06:30:00 AM EDT By Maurie Backman, Motley Fool
Most Americans end up getting a tax refund each year, but if you underpay your taxes, whether intentionally or not, you’ll wind up in the opposite scenario — owing the IRS money. This is especially likely to happen if you earned a lot of secondary income from a side job or investments.
Now if you have the money on hand to pay that tax bill, you’re all set (even if you’re not particularly happy about it). If you don’t have the cash in savings, however, you’ll need to find some way to cover that expense. Otherwise, the IRS will begin charging you interest on your outstanding tax bill to the tune of 0.5% per month, or partial month, that your debt remains unpaid, up to a total of 25%. That interest will begin accruing if you fail to pay your tax bill, or a portion thereof, by the tax deadline.
Seeing as how 40% of Americans don’t have the cash to cover a $400 emergency, it’s likely that many who end up owing taxes will find themselves unable to pay. If that happens to you, you might be inclined to charge your tax bill on a credit card and pay it off when you can. That’s a mistake that you’ll find could cost you big time.
A better way to pay off your tax debt
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