Under the new tax law, some taxpayers may be confronted with an unexpected tax bill, or one much larger than anticipated.
If you're worried that you won't be able to pay your taxes this year, here are some tips that will help you minimize the damage.
You should avoid panicking and still file your taxes, even if you can only pay a portion of the amount due. If not, you'll be subject to a late-filing penalty, which is 5 percent of the unpaid balance for each month it's late, up to a maximum of 25 percent of the amount due. You'll still have to pay a penalty for not paying off your taxes in full, but the penalty is much lower: generally 0.5 percent per month, up to a maximum 25 percent, of your unpaid taxes.
You should also explore setting up a payment plan.
"You designate how much you'll pay per month, and as long as it's reasonable, my experience is that in most cases the IRS will accept it," said Jeff Warnkin, a certified financial planner and CPA with JL Smith Group in Avon, Ohio.
Depending on the length and terms of your plan, along with your income, there could be a fee to set it up. And, you'd still be on the hook for the late-payment penalty, although at a lower rate: 0.25 percent per month that the installment plan is in effect, instead of 0.5 percent, according to the IRS.
Warnkin also says to keep in mind that if you face a tax bill this time around, it's an indication that the same situation could crop up a year from now unless you take steps to prevent it.
"That's where it gets really tough, because the best way is to increase your withholding from your paycheck, but that reduces take-home pay, which makes it harder to pay back what you owe," Warnkin said. "But, you really should do something so you don't get into an endless cycle."
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