ST. LOUIS, MO (KTVI)-Planning for your taxes is a year-long process to make sure you`re on track with your withholdings or estimated deposits. Yet in some cases, you can be thrown a curve ball that you`re not prepared for.
This year we get a small break. Instead of April 15th, taxes aren't due until April 18th.
Wamhoff Senior Accounting Manager, Sandy Furuya explains what might cause some of those surprises, and what you can do if you`re unable to pay by April 18th.
Causes for a 'surprise' amount due on your taxes:
• Sale of a property resulting in income that isn`t typical from year-to-year
• Large payment of income due to an inheritance, legal settlement, or other circumstance
• Forgiven debt which can be reported as income to the IRS by the bank or lending institution to whom you owed the money
• Any self-employment income which may not have been taken into consideration when you set up your withholdings with your full time employer (if it`s side work) or estimated deposits when you estimated your income for the year.
What you can do to plan for this bill:
• If the income is going to reoccur from year to year, adjust the amount withheld from your pay by your employer in order to reduce or eliminate your balance due.
• Increase any deferred amounts such as deferred compensation, retirement plans, and pre-tax items.
• Set up estimated quarterly payments if necessary
• There is still time to reduce your tax liability by funding a traditional IRA (under certain circumstances) by the due date of the return (this year, it`s April 18th) or a SEP for a self-employed individual.
• If you know you are going to have an unusual circumstance in a tax year, set up an appointment with your tax professional well in advance of year-end and discuss how the circumstances will affect your tax bill. You should never be surprised at tax time, and proper planning is key.
What if I cannot meet my tax obligation by April 18th?
• File for a monthly installment agreement online through the IRS website at http://www.irs.gov. There is a $107 fee if you select direct debit. Keep in mind that the IRS must approve the installment agreement and you must continue making payments while your application is under review.
• Submit an Offer in Compromise, which allows you to settle your tax debt for less than the full amount you owe.
The IRS will consider your set of facts and circumstances as it relates to:
-Your ability to pay
-Income and expenses
There is a pre-qualifier tool on the IRS website which can assist you with this process.