Tired of Owing Too Much to the IRS?

There is nothing worse than finding that, come tax time, you owe a big debt to the IRS. But, sadly, many people find themselves in this situation each tax year. If it’s happened to you or if you’re just scared that it might, know that there are things you can do to reduce your tax liability and to feel less stressed at tax time.  

Ask to Have More Withheld  

Sometimes, people owe too much in taxes just because they’re not having enough taxes withheld by their employers, which can happen for a number of reasons, such as choosing the wrong filing status or not compensating for earnings from other sources of income.  

Thankfully, adjusting your withholdings is as simple as adjusting your W-4, which you can typically do by working with your employers’ human resources department. If you’re not sure how best to adjust your withholdings, work on this form with the help of a tax professional.  

Save for Retirement 

If increasing your withholdings is not an option or if it’s not getting you the results you desire, consider contributing (or contributing more) to a retirement account. This smart step could help you plan for the future while reducing your present tax liability at the same time. For example, if you open up and contribute to a standard 401(k) or an IRA account, you can deduct your contributions from your taxable income, which will, in turn, reduce your taxes owed.  

Deduct Any and Every Business Expense

Sometimes, excess taxation happens simply because a person isn’t deducting when and where they can. Did you know that many of your business expenses, especially if you’re self-employed, can be deducted? The money you spend on business travel and lodging or on certain business supplies, for example, could qualify for a deduction, and when you add up all your deductions, it could just make a huge difference in how much you owe.

Ultimately, if you find yourself regularly owing too much to the IRS, you need to make some changes. And, while these changes could be a good place to start, understand that professional tax help is likely going to be your best for saving money long-term and in smart and legal ways that set you up for continued success. 

What To Do When You Can't Pay the IRS

There are many reasons why a person might owe money to the IRS. The reasons, however, are not what’s important. What is important is paying the money that’s owed. If you’re unable to do that, then you do have a few options. Make sure you pick one of these smart ways to pay, rather than doing something drastic and potentially illegal!             

File Anyway

If you’ve done the math and have realized there’s no way you can pay your taxes this year, file anyway. Remember, you are legally required to file taxes each year. If you don’t, you’ll face penalties for filing late, which would only be added to that money you can’t pay. You can request extensions and find ways that make paying your taxes manageable. In fact, that’s what you have to do because just failing to file and ignoring the problem isn’t going to get you anywhere.

Pay in Installments

For most people, paying the monies owed to the IRS isn’t the problem; the problem is being asked to pay it all at once. Fortunately, the IRS will almost always work out payment plans with people who owe. Those who owe less than $50,000 can fill out an installment agreement request (Form 9465). If you owe more than that, talking to an IRS agent individually may result in a payment plan you can manage.

Talk it Out

Finally, no matter what, remember that you can’t hide from the IRS. If you’ve gotten yourself into a bad situation and are unsure how to “pay it away,” contact the IRS and ask about your different options. Or, you could also work with a financial advisor to come up with a “payback plan.” The important thing is not to hide from your financial problems but to be proactive and willing to fix them.

Remember, everyone makes mistakes and gets into tough financial situations. Don’t fault yourself for that; just find the right way to get out of the situation.

Related articles

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