Tax season is upon us and everyone is working hard to get those tax returns done on time. There are a lot of things to consider when you are working on your tax return. You want to make sure that you are putting in all of the information in the right places. You want to talk to your tax professional to ensure that you are getting all of the credits and deductions you qualify for in order to avoid paying too much on taxes during the year. And you want to get it all handed in on time to avoid other issues.
Tax time is sometimes confusing since there is so much to worry about. And when you finally get all of the information put into the tax return properly, it is then time to deal with the tax bill that comes up. While it would be nice to feel the guarantee of never having to pay the tax bill, sometimes your income is too much for the deductions and credits and you have to pay something in for your taxes at the end of the year. If you need help understanding your tax bill and how it should be paid, make sure to talk to your tax professional as soon as possible.
Lowering the Tax Bill
The best thing that you can do to pay off some of your tax bill is find out some of the ways that you can reduce this bill. First, take a look at some of the deductions that are available. Are there some that you may qualify for that you have never thought of in the past? Your tax professional will be able to go through your history and determine if you can qualify for a few more deductions that would lower the amount that you owe for the tax bill. Some simple things like student loan payments and retirement plans could help you to save some money.
After you have exhausted all of the deductions that you currently qualify for, you may want to consider some other steps that you can take. Have you paid the maximum amount that you can in your student loan interest? You may want to consider that for the next year. What about for your retirement plan? The IRS allows you to count contributions up until the tax season deadline and still count it on that years’ tax return. While you would still spend some money for the contribution, that money is going towards your retirement nest egg instead of to the IRS. Talk to your tax professional to see which financial steps you can take to save even more on your tax bill.
Options to Pay the Tax Bill
There are several options that you can take when it comes to paying off your tax bill. First, you can pay it all off at once. This is often the best option because it takes care of the whole bill right away and will avoid some of the interest and penalties that can come from waiting or prolonging the payment period. If you are able to pay all of it, or at least most of it, off at once, especially if it is a little tax bill, this is the way that you should do it.
If there is some reason that you are not able to pay the tax bill, you need to discuss a payment plan with the IRS. The IRS is usually pretty good about setting up these payment plans, but you need to talk to them early into the mix and not wait until the last minute. You also need to realize that you will be charged interest and fees since the full amount is not paid by the deadline. While this option is going to cost you a bit more, it could help make it possible to pay the amount off compared to being stuck with the lump sum. You should still try to pay off as much as possible to avoid as much interest in the long run.
One thing that you should never do is avoid paying the tax bill. The IRS will usually work with you if you need an extension or a payment plan to pay off some of your tax bill. But once you are late with the tax bill, and you haven’t made any other plans, they aren’t going to be as nice. You may have to deal with penalties and other interest and fees. If this goes on too long, there are issues with wage garnishment, missing out on future refunds from the IRS, and even having levies taken out on your personal property.
To make a good determination on which option for paying your tax bill is the best one for you, make sure to talk to your tax professional. They will be able to look at your unique situation and determine how much you are able to spend and whether it is best to just pay it all off at once or work on an installment plan with you.
Hiring a tax professional can often make tax season so much easier to handle. Fine a local tax professional who knows how to work on your specific tax needs and you are sure to get a head start with great results. Contact our offices today to get started.
James Wells EA MBA Tax Office