Tips to pay an unexpected tax bill

Researchers are starting to analyze data for 2018 tax returns. This tax year is the first that used the new tax law, the Tax Cuts and Jobs Act (TCJA) — a tax law that was supposed to result in a reduced tax obligation for the majority of Americans.

Are taxpayers seeing more savings under the TCJA? Thus far, it appears the new tax law has not delivered. The Internal Revenue Service (IRS) reports as of February 15, the average tax return is 16.7 percent less than the same time last year.

What if a taxpayer gets an unexpected bill? Taxpayers may have entered 2019 expecting a refund from their 2018 tax returns only to face an unexpected bill. The IRS provides some options for taxpayers that are unable to pay their tax bill. These options include:

  • Payment plan. Taxpayers with a bill of $50,000 or less may qualify for a payment plan. A payment plan with the IRS allows the taxpayer to pay off their tax obligation over a set period of time.
  • Delayed payment. In some cases, the agency will agree to delay collection of tax payment until the taxpayer’s financial condition improves. An application for a delay generally requires proof of the taxpayer’s financial status and can result in the accumulation of penalties and fees in addition to the tax bill.
  • Offer in compromise. There are situations when a taxpayer can settle their tax bill with the IRS for less than the owed amount. The agency takes a number of factors into account when considering a taxpayer’s application for an offer in compromise including the taxpayer’s ability to pay, expenses and equity.

It is also important to note the government has provided a waiver for penalties that result from a failure to pay one's estimated tax obligations. This will help those who inadvertently paid too little in estimated tax payments throughout the tax year.

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