What You Can Do If You Owe Uncle Sam
It's tax time and everyone is excited to file their returns and get that big chunk of money back that they've been paying in federal taxes for the last year. You see advertisements everywhere, at stores and on-line, to come in and spend your hard earned tax refund, but what if you aren't getting back a refund at all and have a tax bill instead? Tax time isn't too exciting when you owe money. As a matter of fact, it may be a time you are dreading instead. Don't worry yourself too much, though; there are options. See below for helpful ways you can get your tax bill paid without having to sell everything you own.
File Your Taxes
If you already have an idea that you're going to owe money, instead of getting a return back, be sure to still file your taxes. Not filing can result in a late filing fee, which means you'll owe even more money. Be sure to file your taxes and send them in before the April 15th deadline.
Pay What You Can
Even if you can't afford to pay the entire tax bill, send in something to lessen your tax bill. You'll accrue interest and late payment penalties on what you do owe if it isn't paid for by April 15th, but they will only accrue this on what is unpaid, so if you pay something (anything) on what you owe, you'll accrue less.
Ask For An Extension
Once you have your taxes filed, even if you can't pay anything at all, ask for an extension to pay them. You may have interest and penalties accruing, but the extension will allow you to get the money together to pay them. The extension is usually a short-term agreement and you need to fill out a form with the IRS.
Schedule A Payment Plan
File for a payment plan with the IRS. The payments may be more manageable for you in order to get the tax bill paid, as opposed to paying it in full. If you can pay more, do so, as it gets your bill paid faster. Remember that what you owe will still accrue interest and penalties, so the longer it takes you to pay it off, the more you'll end up paying.
Borrow Money
If getting a zero interest loan, using a low (or zero) interest credit card, or borrowing money from a friend or family member is an option, do so. Finding a way to pay off your tax bill where you end up paying the least amount as possible is always best.
Make Adjustments
Once you have your tax bill figured out, be sure to make necessary adjustments to your withholding in order to not have this problem again. If you claim a lot of deductions on your W4, claim less so they take more federal taxes out of your paycheck. If you are self-employed, be sure to pay your taxes quarterly. Save up money throughout the year if you think you are going to owe again; this way you are prepared come tax time next year.
Be sure to take your taxes to a professional tax service to have them filed. They can be sure you are claiming every deduction possible you qualify for to lessen your tax bill. Contact a firm like Balkcom Pearsall & Parrish CPA's PA for more info.