If you owe the federal government additional taxes after filing your returns this year, you have until April 15 to pay without penalty. But if you owe a significant amount, you may be wondering how to come up with the funds in a few short months.
Making a plan and saving smart can help you raise the money in a short amount of time. Here’s how to save up enough to pay Uncle Sam come April 15.
1. Set a savings schedule
Want to save the exact amount you owe just in time to make the deadline? Set a savings schedule so you know just how much you need to put aside on a regular basis. How much you save each week or month will depend on your cash flow, how much you owe and how much time you have.
For example, let’s say you find out by February 15 that you owe $800 to the IRS, and you know you will receive four paychecks between then and April 15. That means you’ll need to save $200 from each paycheck to reach your goal by the deadline (though it might be a better strategy to save a bit ahead just to get it out of the way).
The feasibility of this plan depends on how much you owe. If you can’t set aside enough cash with your current income and spending habits, you may need to look for additional ways to save.
2. Use a separate savings account
If your keep money intended for the IRS in a general checking or savings account, it can be tempting to dip into those funds. Opening a separate savings account at your bank (or another bank entirely) will help ensure your tax-related savings are used for their designated purpose.
3. Get a side hustle
Picking up a side hustle for a few months can help you set aside cash for the IRS — any extra income can go toward paying your taxes. Here are eight side hustles that cost nothing to start.
Remember, any income you earn as a freelancer is subject to tax, so you’ll need to hold back a bit to pay this year’s taxes.
4. Sell your stuff
If you have a lot of clutter sitting around your house or in storage, it’s the right time for a purge. Go through your things and sell anything that is no longer useful and doesn’t have sentimental value. You can unload your stuff at a consignment shop, pawn shop or yard sale.
5. Go on a spending diet
If you need to scrounge up every extra penny to pay the IRS, you may have to go on a strict spending diet. Take a look at your spending habits and try to eliminate everything but necessities until April 15 — including dining out, drinks at the bar and shopping sprees.
If this sounds extreme, try to identify an area or two where you spend more money than necessary, and reduce or eliminate that spending until the deadline. Make sure you’re putting all the money you save directly into your tax debt fund. (Here's a list of ways you can start saving right now.)
There are ways to save on just about any common purchase these days. You can clip coupons, buy generic products at the supermarket, split dinner costs with friends or take public transportation instead of paying for gas and parking. Any time you’re about to spend money, take a few minutes to identity cost-cutting opportunities.
Any extra cash you save should go directly toward your tax debt.
If you still can’t pay the IRS in full by April 15, you have other options. Depending on your circumstances, you may be able to pay down your debt over time with an installment plan. You may also be able to settle for a partial payment or even delay collection if you can’t afford to pay anything. Here's a guide for what to do if you think you're screwed.