Why yes, that is a bill you just got from the Internal Revenue Service. And like all past-due notifications, the sooner you take care of it, the better for you and your bottom line.
The notifications, most of which are going out in June and July, let the recipients know that they have a tax balance due.
To minimize the associated non- or underpayment penalties, the IRS recommends that owing filers pay as much of their 2018 tax bill as soon as possible.
Possible penalty waiver for some: You also should look into the possibility that you can escape the tax penalty than usually applies when a taxpayer's federal income tax withholding and estimated tax payments are short of their annual total tax liability.
Back in March, the IRS announced that if filers paid at least 80 percent of their 2018 tax year's bill through withholding and/or estimated taxes, the penalty charge would be waived. The relief was granted because many taxpayers were confused by the Tax Cuts and Jobs Act (TCJA) changes and did not properly adjust their withholding and estimated tax payments.
The usual percentage threshold in order to avoid a tax penalty is 90 percent. Note that the 90 percent level is back in place for the 2019 tax year, so if you haven't adjusted your withholding to account for TCJA changes, do so now. Like right now!
Notice next steps: Getting any correspondence from the IRS is unsettling. Getting a notice from the IRS that you owe money can be downright scary.
But don't panic.
Your first step is to read it. Or, if you use a tax professional to handle your taxes, take the notice to that person immediately.
Don't just stuff the notice in a drawer and ignore. It won't go away. And avoidance will only make matters worse.
Once you learn how much the IRS says you owe, if you agree the amount is correct, follow the directions in the notice to make the payment. And do so by the date indicated in the notice.
If, however, you disagree with the IRS bill and/or amount it says it due, you or your tax pro should contact the IRS to discuss the discrepancies.
Quick ways to pay: If you do find that even with the special underpayment penalty waiver for tax year 2018 that you still owe tax, it's best to pay Uncle Sam ASAP.
You have several ways to pay that will get the money to the Treasury quickly and help reduce any added late-payment costs. They include:
- Electronic payment options, which the IRS says are the quickest way to make a tax payment.
- IRS Direct Pay from a bank account, which is a no-fee way to pay online directly from a checking or savings account.
- Debit or credit card charges, which are quick and easy, but which also include a processing fee collected by the card and/or processor.
- IRS2Go app, which is mobile-friendly and covers Direct Pay or card payments on your handheld devices.
- Electronic Federal Tax Payment System (EFTPS), which gives you a choice of using the internet or phone to make your tax payment, but which also requires that you enroll before using it.
- Tax software or tax professional help in efiling, which allows you to make tax payments electronically.
Look into longer payment plans: If you can pay all you owe at once, you also have the option of stretching out your overdue tax payments.
An Online Payment Agreement generally lets taxpayers set up a payment plan in a matter of minutes. Individuals who owe $50,000 or less in combined income tax, penalties and interest likely qualify for an Online Payment Agreement.
You can apply online for an online payment plan Monday through Friday from 6 a.m. to 12:30 a.m. Easter Time; on Saturdays from 6 a.m. to 10 p.m. ET; and on Sundays from 6 p.m. to midnight ET.
Whichever payment method works best for you, take advantage of it as soon as you get your IRS bill, or sooner if you know a bill is in the mail.
The only thing worse than owing the federal government money is owing it more money because of penalties and interest.
You also might find these items of interest:
- Know your IRS notices
- Navigating the 3 estimated tax penalty safe harbors
- Owe Uncle Sam at tax time? Here are some ways to pay