About one-third of taxpayers owe the IRS. File your return on time even if you can't pay: the failure-to-file penalty is 5% per month versus 0.5% for failure-to-pay. Set up a payment plan for balances under $50,000, and adjust your withholding or make quarterly payments to avoid owing next year.
What to do if you owe the IRS. Now everybody on social media tells you what to do with a tax refund, but no one tells you what to do if you owe the IRS, so let's talk about it. First thing, don't panic. About 1 out of 3 taxpayers actually owes money during tax season. Now sometimes it happens because you started a side hustle, had several W-2s, got a raise, or just didn't withhold enough taxes. But here's what you should do. File your taxes anyway. Even if you can't pay, you still need to file your return by April 15th. You can file an extension, but you would still have to pay the money by April 15th. So just go ahead and file. Why? Because the penalty for not filing is about 5% per month of the tax you owe, up to 25%. Now, but if you file and just can't pay yet, the penalty drops to about half a percent per month. That's a huge difference. 2, pay something even if it's small. The IRS charges penalties and interest on what you owe, so every dollar you pay now reduces what grows later. Even partial payments help. Third, set up a payment plan online. And most people don't know this, but if you owe less than $50,000, you can usually set up a simple IRS payment plan online. Go to irs.gov and make monthly payments. Now, some people spread the balance over up to 6 years, but if you can try to pay it off as soon as you can, go ahead and do so. And once you're on a payment plan, the penalty can even drop to about 0.25% per month or quarter percent per month. Fourth, fix the problem for next year. If you owe taxes this year, it usually means just one of three things: you need to adjust your tax withholding, or you need to make quarterly tax payments, or you need to get better tax planning advice. Okay, taxes are not punishment, they're just feedback. Financial confidence doesn't come from getting a refund, it comes from understanding the system and planning ahead. So follow me, like this post, share it and save it, and click the link in my bio to see all the ways we're helping uplift, uh, the— and educate the Latino community.
