As tax time nears, you are probably getting ready to settle your tax bill. But what if you don’t have enough cash on hand to cover your business taxes by April 15th?
How to pay your taxes when you can’t cover the full amount
If it’s nearing the last minute and you don’t have the funds lined up, it’s time to come up with a plan. Some common options to consider include setting up a payment plan with the Internal Revenue Service (IRS), paying in full using a business credit card, or taking out a small business loan.
IRS payment plan – The IRS may allow you to set up a payment plan if you qualify. You can avoid set-up fees if you repay the full amount within three months, but you’ll still be charged interest and penalties. One caveat: if you have an outstanding tax lien, you may have trouble qualifying for some business loans. If you need access to new credit in the upcoming months, you may want to find another option to pay the IRS in full.
Credit Card – If you have a business credit card with enough available credit, as long as you don’t max out the card, this may be a good option. It could be especially useful if you have a 0% promotional APR. If not, it can become an expensive option, especially if you don’t pay the balance off before the promotional period ends. The interest you’ll pay on a credit card with a month to month balance can be extremely high, so this is only a good choice if you know you can pay off the balance quickly. If you pay with a credit card, the IRS will also charge you a convenience fee.
Small business loan – For a regular expense like taxes, it’s best to pay off the debt in the shortest time frame that you can manage, so you’re not still paying off this year’s taxes when next year rolls around. If you need quick access to funds, a short-term loan may be your best bet. Look for lenders that keep upfront fees to a minimum. QuickBooks Capital is one lender that offers short-term loans with no origination fees and no prepayment penalties, which means this may be a more cost-effective option to consider.