If you recently filed taxes and discovered you owe this year, you still have some options and a few weeks to make a plan before the April 15 deadline.
If you recently filed your taxes and discovered you owe the IRS, take a deep breath even if you owe thousands, Consumer Reports experts say.
Taxpayers have a few weeks to develop a plan before the April 15 deadline, and it’s especially important if they end up owing at the end of the year.
Whether it was a side hustle, selling a home, or a child turning 17 last year, if taxpayers aren’t careful, there are plenty of reasons why returns show monies owed to the federal government.
Tax preparer Marilee Daugherity says the first step is to address the current situation and advise on how taxpayers can help reduce their tax liability, and then to plan for the future. She says if taxpayers cannot pay when you file, that is okay. They can still file now and try to save the money to pay by the deadline day.
But what if taxpayers do not have all the money to pay by Tax Day?
Then the advice is to pay what can be paid, and to follow up with one of three options.
The first option is to pay with a credit card. The IRS accepts credit cards, and by using one, taxpayers will avoid IRS penalties and fees.
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Marilee says that if taxpayers can get a zero or low-interest rate through your credit card, bank, or credit union, that is definitely the superior option to waiting past Tax Day.
The IRS also offers payment plans if a credit card is not an option. There is an online application, and taxpayers will learn in minutes if they are approved. That option then comes with fees, penalties and interest.
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Finally, there is an “Offer in Compromise.” This program lets taxpayers make an offer to the IRS on what they can reasonably pay, and there is usually a payment plan.
Above all else, if what taxpayers owed was unexpected, then they’re advised to review their return and find out why. It might be worth adjusting tax withholdings on W-4 forms in the future, or if a taxpayer is self-employed and files via Form 1099, set aside more money throughout the year to better prepare for tax season.
If taxpayers disagree with what they owe, they can contact the Taxpayer Advocate Service at the IRS. Taxpayers can also dispute penalties through an appeals process.
As a final note, even if taxpayers file for an extension, they still have to pay for fees and penalties for paying post-deadline.
