Nearly every entrepreneur faces high tax debt at least once in their business ownership. Some go through this struggle every year. As you prepare and file your taxes this year, you may feel overwhelmed by the money you now owe the IRS. In the guide below, we’ll explain how to handle a hefty tax bill so you can get through this experience quickly and easily.
Recheck All Your Numbers And Look For Other Tax Deductions
Before you officially file your taxes, recheck the numbers to make sure there is nothing you missed out on. Look for other write-offs and deductions you may be able to take advantage of, and do the math for each line several times over. This may seem tedious, but all it takes is one simple error add thousands of dollars to your tax bill.
Don’t forget that if you use your vehicle or home office for your business, you can use those as write-offs on your taxable income. This includes gas you put in your vehicle, internet you use for your office, printing supplies you use for your business, and much more. Do not be afraid to get nit-picky with the details because every penny counts.
File An Amended Tax Return If You Notice Errors After-The-Fact
If you notice an issue with your taxes after you have already filed them, you can file an amended tax return with the IRS. There, you will note the mistakes you made during the original filing and submit new information about your taxes. It will take time for your tax debt amount to be adjusted, but it may ultimately lead you to less debt.
Keep in mind that you will need to file an amended return even if the new numbers do not work in your favor. If you are ever audited in the future, you need to be able to prove that you provided accurate information. Do not file an amended return with false numbers as that will be considered tax fraud.
Set Up An Installment Plan For Your Tax Debt
If you cannot escape the money you owe the government, you can work out an installment agreement to pay back your bill over time. This is essentially a loan from the IRS to pay off your tax debt, but it comes with an interest rate you need to keep in mind. If you opt to pay the minimum amount for your installment agreement, you may not even fully pay off the interest on your taxes every month. You’ll never be able to get out from under your debt that way.
Come up with a payment amount that you can logically afford, but make sure it is enough to chip away at your tax debt. You may talk to an IRS agent directly at 1-800-829-1040, or you may be eligible to sign up for an online payment agreement.
Prepare In Advance For Next Year
Once you get this year’s tax debt sorted out, you need to start preparing for next year’s taxes. The sooner you start putting money away or paying quarterly estimates to the IRS, the better off you will be when your tax bill comes in the future.