Prescott Tax and Paralegal discusses what to do if you find you owe the IRS money.

Sometimes people have the unfortunate experience of owing the IRS taxes.  Prescott Tax and Paralegal would like to help inform you of your choices.  If you found out that you owe income taxes, there are two steps that you should take:

1 . Increase the amount withheld by your employer.  For example, if you were withholding at Single and 2 exemptions, change it to Single and 1 exemption if you owed only a little. If you owed a lot, then change it to Single and 0. How do you do this? Fill out a new Form W4 and give it to your employer.

• Self Employed?  You need to make estimated tax payments.  Divide the total amount of tax (Form 1040, Line 63) by 4. The result is the amount that you need to pay each quarter to the IRS. You will mail the check with Form ES.

2. Pay the amount that you owe the IRS. The IRS allows you to set up a payment plan. However, there is a fee for this service ($225 for a standard plan, and $107 for a direct debit plan) The IRS will charge you a .5% penalty for each month the original tax debt is not paid even though you have a payment plan. Additionally, you will be charged about 3% interest on the unpaid debt.

• Sometimes a better option is to pay the tax owed with a 0 percent rate credit card. This eliminates the continually accruing penalties and interest that the IRS charges.

Call us today if you have any further questions. Prescott Tax and Paralegal are ready to assist you with all of your tax filing needs.  Call us at 928-778-3113 or visit http://www.PrescottTax.com for more information.

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