Many people are finding out they owe the government money when they file this year’s tax return.
CPA Matt Bryant said this is something that’s happening, in part, because of the new tax law. “One of the big tax changes was an increase in the standard deduction, which is going to cause a lot more people who itemized in prior years take standard deduction this year,” he explained. “Your withholding tables are based upon standard deduction. So when you itemized in the past, you get more deductions which led to a higher refund.”
The new withholding tables are catching more that a few off guard when it comes to filing. “You’re getting a higher take home pay now then you were, which means less going to the government,” noted Bryant. “So now when it comes time to pay your taxes, you have less on deposit.”
If you prepare your tax return and determine you owe the government money, Bryant said your inability to pay should not stop you from filing. “The best thing to do is to make sure you file on time. There is a penalty for not filing your return on time. And also pay as much as you can. Get the balance down and the IRS will be able to work with you on the balance due.”
If you have no money on hand, Bryant said consider other options. “You could look at maybe using a credit card or taking out a loan to pay it. If you can’t, there are tools avaliable on the IRS website where you can make a payment offer on the website.”
The website is IRS.gov.
“There’s on online payment tool calcualtor that can be used if you owe less than $50,000 individually or less than $25,000 for a business,” Bryant said. “Additionally, you can file form 9465, the Installment Agreement Request and form 433-F, the Collection Information Statement. Both of these can be used at the IRS to propose a payment plan.”
Byrant said the Installment Agreement Request is your proposal to the IRS for a monthly payment amount, usually with a return of upwards of six years. If you can’t pay it off over six years, the Collection Information Statement is like a personal financial statement the IRS can use to determine your availability to pay, based upon your personal financial situation. “Do not ignore it<” Bryant said if you receive a notice from the IRS. “The IRS can take collection actions on you. They can attack to your paycheck and take money from your paycheck. They can go after your house. So whatever you do, communicate with the IRS. They are willing to work with people who are trying to make their effort.”
Consult a trusted CPA if you have questions. For more “Smart Money” advice visit the New York State Society of CPAs website at nysscpa.org/getmoneysmart.