Nothing seems to scare us more than owing money to the IRS on your tax return. However, this is a common occurrence, especially once you start your own business. Figuring out what to do if you owe on your taxes can seem a bit overwhelming, so I'm here to walk you through this process.
Here are a few things to know about owing money to the IRS.
- Most Americans do owe money to the IRS every year, but they had enough withheld from their paychecks or have tax credits to cover any tax due.
- If you owe less than $1000, the IRS considers that an acceptable range and there are no penalties. They are not going to come after you or send you to jail just because you owe them money. Trust me, they have bigger fish to fry.
- You can pay what you owe via bank debit, check, or credit card.
- There are a number of options for payment plans with the IRS, so if you don't have enough money to pay your total balance due don't freak out, you have options.
- You don't have to be stuck owing money to the IRS year after year. Anyone can set up estimated tax payments and pre-pay their tax bill throughout the year. Check out the link to my quarterly tax guide below.
Here's a little tutorial I created to show you how to pay the IRS online.
- The IRS website navigation may change over time, but this gives you an idea of where to go and how to fill out the payment form.
- If you need to make a payment to your state, you can look up their website on this great list https://www.taxadmin.org/state-tax-agencies
Want to learn how to get ahead and not end up owing at tax time?
A note about tax scams: The IRS will never call you on the phone and ask for money. They will send official letters explaining what and why you owe them money (assuming you did not pay on time aka April 15). If you receive a phone call from someone claiming to be the IRS, do not give them any information and hang up because they are scammers trying to steal money or your identity.