What do Pete Rose, Wesley Snipes, Martha Stewart, and Lauryn Hill have in common? They’ve all had tax issues. According to Ahrefs, 164,000 people are searching for the term IRS payments each month. That is a lot of people.
Tax season happens every year, but for some people, it still seems to shock them. Somehow, they end up owing the IRS money every year. People having problems paying their tax bills is a serious situation. And, thanks to inflation, many families and individuals are facing an even bigger struggle.
Around 1,200 people each month search for the phrase, “what if I can’t pay my taxes?”
Ryan Firth of Mercer Street states, “Some people had taxable income apart from their salary, e.g., from a side hustle or selling an asset, that they didn’t account for in their withholdings during the year.”
If you owe the IRS, here are some tips to help you eliminate your tax bill.
Make a Plan
Take stock of your tax bill and create a plan to pay it off. Start off by creating a budget. Examine all of your income sources. This should include the money from your full-time job and any side hustle money.
Allocate a certain amount of money each month for your expenses. Set aside cash for your bills, entertainment, etc. The amounts depend on your situation. Be sure to include your tax bill in that amount. Plan to set aside the minimum payment the IRS requires and, if you can manage it, a little bit more to pay off the tax debt sooner and reduce the interest you will end up paying.
After your tax bill is paid, consider setting some additional money aside in case you owe the next year. If you don’t, you’ll have a good head start on an emergency fund for the future. Commit to making this your last year without a plan.
Review Deductions
Look at your tax return to see if you are eligible for any deductions that could lower your potential tax bill. If you’re not sure what you’re doing, contact or visit a tax service such as HR Block. The representatives are there to help you.
If you think you can do it yourself, tax software like TurboTax or TaxAct is a good way to go. Any deductions you receive will help you lower your bill, but make sure every deduction is legit. You don’t want to mess things up and end up having to owe even more money or added fees because you fudged your return.
According to Doug Amis, CFP, CLU & President & CEO of Cardinal Retirement Planning, Inc, “There are some credits and deductions that can help lower tax bills. Making a traditional IRA contribution, if you are eligible, can decrease your tax liability. For self-employed individuals or those with a side hustle, a SEP IRA plan is another avenue to look at for lowering your tax liability.
“Lastly, there is a saver’s credit that is awarded to taxpayers with lower incomes who make contributions to their retirement plan. All of them add up to help you have more dollars and cents.”
Payment Options
You should contact the IRS immediately if you can’t pay your tax bill in full. They can get you set up with a payment plan. With the payment plan, you will have more time to pay your tax bill. The only downside is that there will be interest and possible penalties applied. But this may be your best option if your tax bill is high or you don’t have the money right now.
Increase Income
If you are serious about paying your tax bill, increasing your income is one of the best ways to do so. There are tons of things that you can do to make extra money.
You can sell those items online if your old clothes and shoes are in good condition. Poshmark, eBay, and Mercari are three places where you can list the items. Each platform gets tons of views, so your items will sell in no time. One way to speed up the sales is to list the item on each platform.
If you have a passion for writing, consider doing some freelance work. If you have a blog or some writing experience, that can be a huge advantage. You can list your services on Fiverr and Upwork. You may have to start off with lower prices, but the good thing is that you can increase them as you get more clients.
People are busy these days. If you like to drive, you can deliver food using Door Dash or Uber Eats. Depending on where you live, you could make good money doing this. You can also drive Lyft or Uber.
Weekends and big events are great times to turn on the app and find some good-paying riders. You can drive up to 12 hours daily if you have the time.
The opportunities are endless. If you really want to increase your income, there are tons of things that you can do. Take some time to figure out which side hustle works best for you, and give it a shot.
Just remember that for most side hustles, you have to pay taxes – sometimes even more than usual if you’re considered self-employed. So calculate that into your budget.
Reduce Your Expenses
Reviewing your expenses and cutting back on some things can free up some money for your taxes. You can cancel certain services like Netflix or Postmates for a few months. You can cut back on eating or going out. Do what you have to do until that tax bill is eliminated.
At the end of the day, taxes are not something you can ignore or forget about. If you owe the IRS, now is the time to take action and ensure your debt is paid off and you don’t owe in the future. These ideas can help. You can do this. Just make the decision to start and come up with a plan.
The article was produced by My Money Chronicles and syndicated by Wealth of Geeks.
source https://wealthofgeeks.com/strategies-for-paying-off-your-tax-bill/
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