Owing taxes
The Tax Cuts and Job cuts were enacted in December 2017 in the United States by the department of revenue. This resulted in a change in the direction employers take to determine the amount of income tax that is to be deducted from your salary. Many Americans did not know that also the W-4 forms required an adjustment, and this led to many of the taxpayers not having the right amount of taxes and instead of getting a refund, they owe the IRS. Having a bill instead of a refund will negatively impact your credit score, and you will get higher penalties and interest rates. Taking a second look at your withhold is necessary to determine if they are any changes to take.
In order to know if you owe more taxes, you should pay more attention to your W-4s. It will also aid in understanding issues such as if you get side jobs how much tax you will owe. Since, if as a taxpayer, you are not able to make the estimated tax payment, then you will owe tax even if your other job was initially taxed. A family with dependents had an added advantage when it came to being taxed since less tax was deducted from there pay, but now, they have to pay regular taxes, and you need to update your W-4s, but if you have not, this means you owe more tax. Those who have already retired also require to ensure their W-4 are in line and do not require the implication of a lot of tax.
What steps to take
They are several steps to take to curb the damage that may be caused by owing taxes, and this includes; Filing your tax early when you owe more money, or you have an assumption that you do. This will help in finding out the deficit you have and hence get more time to acquire the balance. Moreover, if you were to get a refund, instead, it will also be an advantage since it will come early. However, if you owe the IRS and fail to pay on time, you will be subjected to a penalty, and so it’s better to be on the safe side.
Negotiating a payment plan. It may be quite challenging to pay the tax you owe, and hence a payment plan can be arranged that enables you to pay for 120days. If you prove to comply with the requirements, you can also get an extension of the 120days. Also, you can qualify for an” offer in compromise,” which will enable you to pay a less amount than the one you owe, but you have to meet the specific requirements. When the IRS discovers that you cannot manage to deliver, they will give you more time until you can be financially stable and pay. Moreover, some penalties can be waivered in certain circumstances.
Consulting a professional if you owe tax or you have an assumption that you may owe, and you do not the way forward. They can also aid in educating you about tax brackets and the passages from one tax bracket to another; this is to prevent more confusion in the future. Also, you will be able to learn about the differences in tax from one state to another.