Tax season: A time when some enjoy a much-anticipated return, when others break even, and when others dread knowing what they owe.
If you’re in the category of “owing” and weren’t anticipating that expense, you may be panicking. What do you do now? What if you can’t pay that hefty bill immediately?
David Fultz of Barsz Gowie Amon & Fultz offers the primary piece of advice for anyone in this situation: Do not ignore your tax obligation. While it can be easy to push aside a stressful debt, the IRS has ways you can work out a payment agreement that fits your pay-off deadline.
Additionally, when you see that you owe, you can pay what you can and aim to pay it off soon. The bottom line is that the IRS wants to know you’re aware and actively working on the payment.
“Let’s say that you could pay off what you owe in two to three months,” said Fultz. “What you could do is just pay what you can. Then, the IRS will send you a bill the following month, and you can make another payment. The next month, they’ll send another bill, and you can continue until the balance is paid off.”
Fultz does note that the IRS does charge penalties and interest. It’s always in your best interest to pay what you owe sooner than later because the longer you wait, the more interest and penalty you will pay.
Fultz then indicates that another critical action to take is to understand why you owe, as this can help you plan better for the next tax year.
“If you’re an employee receiving a W-2 and not enough federal tax was withheld from your paycheck, you can submit a new W-4 form to your employer to have more taxes taken out,” said Fultz. “Additionally, you can make estimated tax payments by either paying online through the IRS website or mailing a check with an IRS payment coupon. Both options can help you avoid owing taxes next year.”
For taxpayers not already working with an accountant throughout the year, Fultz also states how doing so can eliminate unwelcome surprises come tax season.
He shares the example of how, at Barsz Gowie Amon & Fultz, they do tax planning throughout the year and can let their clients know if they don’t have enough tax withheld from their paychecks. In cases such as this, an accountant will ask for year-to-date pay stubs.
“This allows us to project their total income and estimate how much federal tax is being withheld,” Fultz stated. “If we see that they’ll owe taxes, we can advise them early — say, in July — that they are projected to owe $5,000. At that point, they have options: they can adjust their W-4 to have more tax withheld from their paycheck or make an estimated tax payment to cover the shortfall.”
Learn more tax tips at Barsz Gowie Amon & Fultz. Barsz Gowie accountants can help you identify areas that impact your growth and profitability and work with you to develop comprehensive solutions.
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Tax payments for individuals are due on Apr. 15, even if you file an extension. If you don’t know the exact amount you owe, the IRS expects you to estimate and make a payment to avoid additional penalties and interest. Always consult with a tax professional to ensure you’re meeting your tax obligations.
