Tax season is over, but for some that’s the beginning of a new process: that of preparing for payments for tax due to Federal and state agencies. So what now? See below for the next four steps you should take to get a handle on it.
1. FILE ANYWAY.
The IRS imposes penalties for both late filing AND late payment. You can avoid one of these by filing your tax return on time.
2. FIGURE OUT HOW MUCH YOU CAN PAY TODAY
Since penalties on late payments are assessed based on the amount remaining due, you can decrease the amount of interest you'll pay on the unpaid amount by sending something towards your bill. Remember, even if you choose to file an extension, any taxes owed are still due on the filing deadline. Therefore if you don’t pay by the deadline, you are subject to those extra penalties and fees.
3. GET ON A PAYMENT PLAN
If you are not able to pay the amount due in full by the tax deadline, the IRS offers methods by which to pay over a period of time.
• You may qualify for extra time to pay your taxes if you can pay in full in 120 days or less. You can apply online at IRS.gov. There is usually no setup fee for a short-term extension.
• If you owe $50,000 or less and need more time to pay, you can apply for an Online Payment Agreement on IRS.gov. A direct debit payment plan is your best option. This plan is the lower-cost, hassle-free way to pay. The set-up fee is less than other plans. There are no reminders, no missed payments and no checks to write and mail. You can also use Form 9465, Installment Agreement Request, to apply.
4. REASSESS
Now is the perfect time to review your withholdings and estimated tax amounts. Are you on track to be in a similar income situation next year? You may want to update how taxes are withheld from your paycheck, or if you’re self-employed, how much you send to the IRS throughout the year so that you aren’t in for a surprise next April. Take advantage of the IRS paycheck checkup tool to be proactive about your tax planning before it’s time to file.
DISCLAIMER: I am an accountant, not your accountant. Please speak with a professional about your specific accounting and tax needs before putting any of the aforementioned tips into practice.