As W-2s and 1099s begin arriving in mailboxes around the country, it’s a clear sign that tax filing season is upon us. As a result, savvy taxpayers work diligently to keep their burden as low as possible, limiting their bill or allowing them to secure a larger refund. Tax breaks can be an excellent way to limit your liability, but only if you know they are available (so you can claim them). Here are seven surprising tax breaks that actually exist and are worth exploring.
For many, tax season is a relief because they know they will be getting a large tax refund. However, a few people are hit with an unexpected tax bill. If you have to pay a tax bill this year and don’t have the cash available to pay the full amount, pay what you can. Beyond that, you have several options:
Take a loan from the bank. If you have good credit, you may qualify for a loan from your bank. However, this process may take a few days, and not everyone will qualify. If you do qualify, the bank will probably offer you a lower interest rate than the other options listed below.
Pay with your credit card. True, you will be paying for your tax bill at up to a 19.99% interest rate, depending on your credit worthiness, but it may be worth it to avoid paying late penalties to Uncle Sam. If you have good credit, you could always try to open a credit card account with a 0% introductory APR and pay it down before the introductory APR expires.
Get a cash advance. A cash advance can be a good source for short term loans. However, make sure you understand the terms and be sure to compare interest rates to make sure it is better to pay the interest rather than the penalties you may have to pay the government.
Take out a peer-to-peer lending loan. You can apply for a loan through Prosper or Lending Club. You will need to submit some paper work detailing your current credit worthiness, and then members can choose to “invest” in you and fund your loan.
Borrow from friends or relatives. If you have no other options, borrow from friends or relatives. Make sure to make timely payments so you don’t affect your personal relationship due to borrowing money.
Tax season typically causes a great deal of stress, especially when you discover you owe money and don’t have the money to pay readily available. If you owe a large bill, you may want to gather money from a number of sources. While you can make payments to the government, there are hefty fees to pay, and the consequences for not paying your tax bill can be severe.
Once you have made your tax payment, you will want to pay off the loans as quickly as possible, especially since many of the sources of quick money have high interest rates. You may even consider taking on a second job until the loans are paid. While facing an unexpected tax bill can be stressful, there are ways to pay.