(FinancialHealth.net) – It’s tax time again, and you are in a bit of a pickle. Your accountant filed your taxes, and you owe Uncle Sam some money. Don’t worry, it’s not the end of the world. You have options.
According to a recent survey conducted by OnePoll for Self, 44% of people polled said they wouldn’t be able to afford a large tax bill. Another survey by NerdWallet found one in five people worried they’d owe the IRS money this tax season. How much money? The average amount will be $2,667.
If you do end up owing money to Uncle Sam, take a deep breath and stop panicking. Here’s what you need to do:
- If you have an emergency fund that can cover your tax bill, pay it. It’s better to get it out of the way so you don’t have to worry about additional penalties.
- You can file for an extension. To do this, file IRS Form 4868. You’ll then have until October 15 to file your tax return.
- Ask the IRS for a short-term payment plan (120 days or less). This allows you to pay over an extended period of time. If you qualify for a short-term payment plan, you won’t have to pay a user fee.
- Get a long-term installment plan (120 days or more). To do this for Direct Debit payments, you’ll have to pay a $31 setup fee if you’re online or $107 if you do it over the phone, by mail or in person. The money will automatically come out of your account each month. If that doesn’t work for you, make payments through Direct Pay. That’s a $149 online setup fee or $225 over the phone, in person or by mail. If you are low-income, there are ways to get the fees waived.
- If you owe more than $10,000, you can request a Partial Payment Installment Agreement (PPIA). This allows you to make payments based on your income and what you can afford.
The IRS may seem intimidating, but the agency is good about working with taxpayers. At the end of the day, you both want the same thing: your debt to be eliminated. The worst decision you could possibly make is ignoring your tax debt. Doing so will lead to interest, penalties, and even wage garnishment.
To find out which of the options listed are best for you, speak to your accountant, or you can call the IRS at 800-829-1040.
~Here’s to Your Financial Health!
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