What Should You Do if You Can’t Pay Your Tax Bill on Time?
By Alan Olsen
The 2019 tax season is in full swing and it’s already come with several changes and surprises. One of the biggest surprises is the number of taxpayers that are either getting a much smaller refund, or not getting a refund period. However, according to recent reports from Treasury Secretary Steven Mnuchin, refunds have been up recently. In fact, Mnuchin said that refund amounts had increased 17 percent in the last week of February, compared to the previous week. Essentially, that means payments are at “the same level as last year,” according to Mnuchin.
Surprise Tax Bill
That doesn’t do anything to help taxpayers that have already received their refunds with much smaller amounts. And for some taxpayers, the news is much worse. Some taxpayers have been shocked to learn that not only were they not getting a big refund, but also that they actually owe taxes. In other cases, people who expected a tax bill were surprised to find their bill was even higher than anticipated. There is still a month before the April tax deadline, so the numbers could change for better or for worse. But to this point, the tax season has left many taxpayers unhappy. But whether you’re happy or not, if you have a tax bill you need to pay it.
Be Proactive
So what should you do if you’re one of the unlucky people who ended up with an unexpected tax bill, or a higher bill than you anticipated? The deadline is fast approaching and you have to pay. But what if you don’t have the money to pay off your tax bill by April 15? Is there anything you can do? Start by being proactive. Don’t wait till the last minutes to figure it out. Come up with a plan and then act on it.Start by filing your taxes on time and paying whatever you can afford. That way, you won’t have to worry about a late-filing penalty on top of your tax bill. You’ll still have to pay a late payment penalty, but it’s much lower than the late-filing penalty.
Create a Payment Plan and Stick to it
The next thing to do is set up a payment plan with the IRS. In most cases, the IRS will accept any payment plan that’s reasonable.You might have to pay a fee to set up your plan, depending on how long it lasts and the terms of the agreement. You’ll also be responsible for the late payment penalty, but the interest rate will be much lower. According to the IRS the rate drops from 0.5 percent to 0.25 percent per month for as long as the installment plan is in place. Once your plan is in place, make sure you stick to it. Always make payments on time and in full.
Learn From Your Experience
Lastly, makes sure you learn from this experience and take the necessary measures to prevent the same situation from happening next year.
The post What Should You Do if You Can’t Pay Your Tax Bill on Time? first appeared on Advisors to the Ultra-Affluent – Groco.
