2121 W AIRPORT FRWY SUITE 101 IRVING, TX 75062 | CALL: 469-647-9950 | FAX: (469) 293-3500



Cheshier Tax Resolution Blog

rss

Tips and case resolution studies


30 million people may get a tax bill, not a refund, this year—here are 3 steps to take if you're one of them
Because of the new Tax Cuts and Jobs Act, which passed in December 2017, the Internal Revenue Service and U.S. Department of the Treasury changed the withholding tables, which are the guidelines employers use to decide how much income tax to deduct from your paycheck. 

 

But lots of Americans didn't realize they were supposed to adjust their W-4 forms, too. And the largest share of people who may now get an unpleasant surprise when they file their taxes are those who didn't adjust their W-4s. 

 

Overall, refunds dropped more than 8 percent during the first week of tax filing season this year, according to the IRS. And about 30 million people, more than 1 in 5 taxpayers, didn't have the right amount of taxes withheld from their pay and may not get a refund at all, the Government Accountability Office reports.  

 

Instead, they may owe the IRS money. 

 

If you find yourself with a bill instead of a refund, it's important to take it seriously. Failure to pay can damage your credit score, cost you more money in interest and penalties and, in extreme cases, lead to criminal prosecution. 

 

 Here are three steps you can take to make things better, both for this year and going forward: 

 

 File early  

 

If you owe money, or think you may, file your taxes early. "Taxpayers should file their returns or estimate their tax liability as soon as possible," Barry Kleiman, a certified public accountant and principal at tax firm Untracht Early, tells CNBC Make It.  

 

That's because "the balance does not have to be paid until April 15," which is the deadline in most states this year. The earlier you find out what you need to pay, the more time you have to get the money together. And if it turns out you are getting a refund, you'll get your money sooner.  

 

Either way, if you do your taxes early, you'll get it over with. If you owe but don't file, you could be subject to the IRS's failure-to-file penalty, which could cost 5 percent of your unpaid tax bill each month it goes unpaid, for up to five months.  

 

If you file but don't pay, you could face a smaller penalty of 0.5 percent on what you owe each month until you pay in full, and which could reach a maximum of 25 percent of what you owe. "In most cases, the failure-to-file penalty is 10 times more than the failure-to-pay penalty," the IRS reports. 

 

You could also file for an extension, which gives you until October 15 to file your taxes. But an extension to file, generally, is not an extension to pay. You'll still have to take care of most of your bill by April 15 to avoid penalties, says Anil Melwani, a New York-based certified public accountant.

 

 "The tax authorities have no problem giving anyone until Oct. 15 to file their returns," he says, "but they do not want to wait that long to receive 'their' money." 

 

The deadline to file an extension was April 15. 

 

Get on a payment plan 

 

Though you may not be able to fully pay what you owe, you can try to negotiate a payment plan. The IRS's short-term payment plan allows you to make monthly payments to chip away at your debt, as long as you can pay your entire bill within 120 days. 

 

Interest and penalties will still accrue until the total is paid off, but there are no additional fees.  

 

For more significant totals, you may be eligible for the long-term payment plan, in which you'll have more than 120 days to pay off your debt. Additional application fees will accrue, though. 

 

You could be eligible for an "Offer in Compromise," which allows you to pay less than you owe, if you meet certain qualifications and would fall into serious financial hardship if required to pay your debt in full. But "the Offer in Compromise program is not for everyone," the IRS notes. Before applying, explore all other payment options. 

 

If the IRS determines you can't pay anything, it can temporarily delay collection until your finances improve. Interest is still charged until you pay in full, however, and the agency may file a federal tax lien against your property to "protect the government's interest in your assets."  

 

The IRS could also waive certain penalties if you've paid at least 85 percent of your 2018 tax liability. 

 

 Take charge  

 

Almost half of Americans don't know what tax bracket they're in and 28 percent don't know exactly what changed with the passage of the Tax Cuts and Jobs Act. Knowledge is power: Do some research or talk to a professional, especially if you owe, or think you may owe, money. You may be able to get yourself into a better position for the future. 

 

Aside from people who didn't adjust their withholding rates, taxpayers with large salaries in states with high taxes, as well as those with work expenses they usually write off, are likely to face more complex returns this year. Here's how to tell what you might owe or get back.



Comments are closed.
Showing 0 Comment


Testimonials
  • "I would recommend Cheshier Tax Resolution to anyone trying to catch up with the IRS."

    JEFF E.tax client
  • "I was getting behind more and more; Dionne's team helped me get back on track and they did it fast!"

    BRIAN H.tax client
  • "So nice to finally just put the company on auto-pilot; I focus on growth, CTR takes care of the books."

    STEVE M.payroll client
Certifications