When a tax bill is higher than one can cover

Sometimes, when a person is done with their tax returns, they are a bit surprised by the results.

In some instances, these surprises are of the pleasant variety. A person may be getting a refund that they weren’t expecting or they may be getting a larger refund than they had anticipated.

Unfortunately, unexpected tax return results could also go the other way. A person who thought they might be entitled to a refund might instead end up facing a tax bill. Or, a person expecting a tax bill may end up with a bigger one than they had been guessing they would.

These unpleasant surprises can go beyond just being disappointing, they can sometimes lead to a person facing some substantial challenges. For one, instances can come up where a person doesn’t have enough money to cover an unexpected tax bill or an unexpectedly high tax bill. Such a situation, if not handled properly, could create some significant tax problems for a person.

Now, when a person finds themselves with a tax bill that is more than they can handle with their currently available resources, there are various options they may have available to try to address the situation. For one, taking out debt to cover the bill might be an option. Another possible route is trying to work out an arrangement with the Internal Revenue Service to get more time to pay the bill, such as an installment plan or an extension. What types of such arrangements a person would be able to pursue depends on their situation.

A person’s individual situation can not only impact what options they would have for addressing a tax bill that they don’t currently have enough to pay in full, it can also significantly impact which of the available options they have would be best suited for them. So, facing difficulties in paying a tax bill can be a complex situation, where a wrong step could have significant implications. Thus, a taxpayer may want the guidance of an experienced tax law attorney when trying to figure out what approach to take for addressing tax bill struggles.

Source: Fox Business, “You Owe Taxes, But Can’t Pay the Bill,” April 6, 2016