How to handle unexpected tax bills
Nobody likes the process of filing taxes but, if you’re like a majority of Americans, filing your taxes typically results in a refund from the IRS. People who owe the IRS typically tend to file their taxes later than those getting a refund because they’re expecting a tax bill.
However, what if you’re one of the millions of Americans who file expecting a refund and instead find out that they owe the IRS money? There’s no doubt that receiving a tax bill that you hadn’t planned for can be very upsetting, especially if the amount you owe the IRS is large and creates a financial hardship for you.
Some common reasons for getting an unexpected tax bill include:
- Improperly filling out W-4’s and not withholding enough
- Incorrect estimates on quarterly estimated taxes
- Change in filing status
- Earning more
Even if you don’t have the financial resources to pay what you own on time, don’t panic! There are steps you can take when it comes to how to handle unexpected tax bills.
Taking care of your debt
If you don’t have any “rainy-day” funds available, figuring out how to handle a large tax bill can be very stressful. However, the following steps can help make dealing with an unexpected expense as painless as possible:
- File on time and pay what you can
- Request a payment extension
- Set up a payment plan with the IRS
- Utilize benefits from your employer
- Borrow from friends, relatives, or your 401(k)
- Take out a home equity line of credit
- Update your W-4 form
Time to hire a CPA
Resolving tax debt can be complicated. In order to ensure that you don’t end up with unresolved tax debt, you should work with an experienced CPA.
At GYL CPAs and Advisors, CPAs for individuals, we offer our clients accurate, accountable, and proactive tax planning and preparation. Our professionals can help you to maximize your opportunities while minimizing your tax liabilities.
Our goal is to help you keep more and pay less. Contact our office to schedule a consultation.