20% of Americans With Tax Debt Are Stressed About Paying — What You Can Do
Tax time is stressful enough — between putting together all the paperwork, calculating deductions and bracing for impact if you owe the IRS any money, there’s plenty to worry about.
According to a new survey conducted by U.S. News & World Report, one in five people with tax debt is “extremely stressed,” and most are unprepared to pay. The outlet polled more than 1,200 respondents, nearly half of whom (45%) said they were surprised they owed this year. Of that group, 61% said they normally get a refund. An additional 28% said they “don’t know why they owe.”
Of course, with changes to tax codes for the 2022 filing year, many people noticed a change with the final result of their return, whether a reduction to their normal refund or a new tax bill. As GOBankingRates reported, this is because many pandemic-era benefits have now subsided such as earned income, child care and dependent care credits and stimulus payments.
Since many people also took on side hustles this year in order to make ends meet, that extra income is taxable and probably did not have any withholdings since side gigs are usually contracted work.
Another issue the survey found is that 29% who have a tax bill said they won’t be able to pay it by the April 18 deadline. The ones who will pay it will do so by using a credit card (41%), borrowing money (23%) or getting a personal loan (21%). Though, the outlet points out that many plan to enroll in a payment plan with the IRS (26%).
Take Our Poll: What Do You Plan To Use Your Tax Refund For?
If you find yourself with taxes owed this year, there are a few things you can do to help pay the bill and relieve this burden for 2023:
- Try to file an extension. If you think you just need a few more months to pay the tax bill in full, you can file a request for a 120-day extension with the IRS, giving you until about mid-August to pay the bill in full. However, there will be some interest and a late-fee penalty applied — around 10% with all things considered.
- Enter into a payment plan with the IRS. If you have a larger balance you are unable to pay off in a short amount of time, the IRS lets you enter into a payment installment agreement, broken up over the course of up to 72 months. There is a $130 application fee to apply –as well as interest and late fees — but all can be rolled over into the payment plan.
- Look into hardship programs. If your balance is insurmountable and something you cannot afford, you may be able to enter into what is deemed an “offer in compromise” with the IRS. If approved, you pay just a fraction of the cost, but there are many stipulations with this agreement. Check out the official IRS site to see if you might qualify.
- Plan to withhold more from your paycheck or pay estimated taxes. If you owed more than usual this year, you might want to look into some alterations for 2023 returns such as withholding more from your paychecks every month or paying estimated taxes to the IRS on a quarterly basis — especially if you have side gig work. You can work with your company’s HR department or a CPA to help you with both of these items.
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