Majority of the people who file taxes are eventually getting money back from the IRS in the form of a refund. However, some of them wind up owing money. In 2019, almost 8 million filers ended up with an underpayment on their hands. Unfortunately, if you don’t have cash at the ready to make the IRS whole, that can cause you problems. Still, you have several options for dealing with a tax bill if you can’t cover it.
Try to get on an instalment agreement
The IRS is very amenable to giving filers more time so that they can pay their outstanding tax bills. You can sign up with the IRS for an instalment agreement if you are unable to pay your total debt in full. However, you’ll still be charged interest and penalties under instalment arrangement, and you’ll usually have to pay a modest fee to set one up. But on the bright side, the IRS won’t try to garnish your wages due to an outstanding tax bill. You’ll be able to collect your paycheck and work with the agency to get your debt paid off in due time.
You can file your return on time
If you can’t pay the money you owe the IRS money, you must at least file your tax return timely. You’ll be served with a very expensive failure-to-file penalty if you’re late. That will make a difficult situation even worse.
While there’s no penalty if you’re late with your tax return, the IRS owes you a refund. So, you’re essentially penalizing yourself by delaying that money. On the other hand, if you owe money on your taxes and submit your return late, the failure-to-file penalty will cost you 5% of your unpaid tax bill for each month. Try to avoid that, as this penalty is quite expensive. It’s better to notify IRS timely.
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