All around our great nation, taxpayers are receiving some bad news from their tax preparers. Rather than receiving a refund, they owe more in tax! Such a result is possible in any year for any taxpayer, but because of the adjustments to withholding that occurred with the new Tax Cuts and Jobs Act, the situation of “falling short” has reached new levels this year. This year, according to CNBC, citing a July 2018 Government Accounting Office Report, 30 million people or 21 percent of U.S. taxpayers are expected to owe money to the IRS this tax season.
So, what should you do if you are one of the 30 million? First, don’t panic. Second – file the return. Don’t for a second think, I don’t have the money, so I won’t file. This is a major mistake. Failing to file subjects you to a 25% penalty of the tax owed (it’s actually 5% per month to a max of 5 months). Failing to file simply increases the amount you owe by 25% – a terrible mistake. Third – be sure to adjust your withholding for 2019 (don’t wait until next year) so that you will not owe taxes for the 2019 tax year.
As to the amount you owe, if you have the cash and can make the payment, then bite the bullet and pay. If not, you are eligible to pay the tax over time, up to 72 months, if needed, and if you process an Installment Plan providing for automatic withdrawals from your bank account, then you are assured there will be no lien filed against you. While you can go online and work through the process of establishing an Installment plan, our advice is to do so through a professional. The reason is that you want to make sure it is set up correctly to avoid any chance a lien is filed, and you want to check and make sure you are in a position to fully pay your 2019 taxes. If not, the installment plan you set up for 2018 will default as soon as you fail to timely pay the 2019 taxes. There are solutions around this problem, but they require planning and knowing how to avoid problems. Jenny Lingl, our tax expert, addresses these issues all the time – quickly and at low cost.
Now – if you happen to have other debt and issues that need to be addressed – it so happens we have a FREE SEMINAR on Wednesday, May 1st at our offices in Bingham Farms. “Debt Free – From the Dream to Reality”. This seminar will include a special segment lead by Jenny Lingl, our Tax Collections Expert, on resolving tax issues. Details to sign up are below.
BOTTOM LINE – no one wants to owe taxes (and for that matter, no one wants to pay taxes) but it’s a controllable situation and you need to be smart about how you handle it.
Have a great week,
Ken
P.S. Did you know that THAV GROSS offers free consultations for business, financial, and tax problems? Call us anytime – (248) 645 – 1700 or CLICK HERE to send us a message.