Surprise Tax Bill? 5 Steps To Meet The Challenge
Many Americans were hit with an unexpected tax bill this year. If you're part of this unfortunate category, things may seem daunting. But don't despair if you can't pay your bill when you file. Instead, follow these steps to success.
File Now. The first step to avoiding any IRS tax problems is to file your taxes as soon as possible, if they're not done by April 15. The IRS assesses additional penalties and late fees if you fail to file on time, so you avoid paying even more money. And you can file at any time without sending in the money owed at the same time.
Look Into Payment Plans. The IRS offers installment plans for taxpayers, but they come with certain caveats. The first is that you'll likely pay between $31 and $149 to set up the payment plan. You'll also pay interest on the unpaid balance, often at a rate of at least 5%. An installment agreement does keep you out of trouble with the IRS, but the costs add up quickly.
Get a Loan. A personal loan is a good alternative for those who don't want to pay extra or who don't like owing the IRS. A personal loan often comes with a lower interest rate and may not have any origination fees. You pay a set amount each month, usually through automatic withdrawal (for a rate discount), and won't be able to rack up more charges on the loan. A personal loan also builds good credit, which the IRS payment plans don't.
Add Extra Payments. Most people occasionally get an unexpected bonus of some sort. It may be a bonus or commission at work, a small inheritance, the sale of an asset, a refund, or gifts from others. Put these extra windfalls toward your personal loan to get it paid off quickly and easily.
Assess Your Taxes. Now that you have 2018's taxes in hand, it's time to start planning for the future. You don't want to end up with a surprise tax bill next year too. Talk with your tax preparer about why your tax situation changed and how to adjust your plans to prevent it again. This may mean increasing your withholding or even paying quarterly taxes. If you need to make large-scale changes, make them in incremental adjustments so your budget doesn't get a shock.
While no one likes to get a surprise tax bill, it's no reason to panic. By following these five steps, you can meet the challenge, pay it quickly, and make a plan for a positive 2019. You can click here for more information.
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