Beating the Taxman: Effective Strategies for Paying off Your Tax Bill
What do Pete Rose, Wesley Snipes, Martha Stewart, and Lauryn Hill have in common? They’ve all had tax issues. Tax season happens every year, but for some people, it still seems to shock them. For some reason, they still owe the IRS money every year. According to Ahrefs, 164,000 people are searching for the term IRS payments each month. That is a lot of people. Some may be looking for refund payments, while others may be looking for info about how to make payments. Another 1,200 people each month are searching the term “what if I can’t pay my taxes?”
As you can see, people having problems paying their tax bills is a serious situation. Due to inflation, many families and individuals are struggling right now.
Ryan Firth of Mercer Street states, “Some people had taxable income apart from their salary (e.g., from a side hustle or selling an asset) that they didn’t account for in their withholdings during the year.”
If you are one of those people, It doesn’t have to be that way. If you owe the IRS, here are some tips to help you eliminate your tax bill.
Make a plan
Take stock of your tax bill and create a plan to pay it off. One thing that you can do is set up a budget. Examine all of your income sources. This should include the money from your full-time job and any side hustle money. Allocate a certain amount of money each money for your expenses. Set money aside for your bills, entertainment, etc. The amounts depend on your situation. Be sure to include your tax bill in that amount. Doing that will give you some money to put on the bill. That probably wasn’t possible in the past because you didn’t have a plan.
Look at your tax bill to see if you are eligible for any deductions that could lower your tax bill. If you’re not sure what you’re doing, contact or visit a tax service such as HR Block. The representatives are there to help you. If you think you can do it yourself, you can use tax software like Turbo Tax. Remember that any tax deduction you receive will help you lower your bill, so make sure the deductions are legit. You don’t want to mess things up and end up having to owe more money.
According to Doug Amis, CFP, CLU & President & CEO of Cardinal Retirement Planning, Inc, “There are some credits and deductions that can help lower tax bills. Making a traditional IRA contribution, if you are eligible, can decrease your tax liability. For self-employed individuals or those with a side hustle, a SEP IRA plan is another avenue to look at for lowering your tax liability. Lastly, there is a Saver’s credit that is awarded to taxpayers with lower incomes who make contributions to their retirement plan. All of them add up to help you have more dollars and cents.”
You should reach out to the IRS if you can’t pay your tax bill in full. They can get you set up with a payment plan. With the payment plan, you will have more time to pay your tax bill. The only downside is that there will be interest and possible penalties applied. If your tax bill is high or you don’t have the money right now, this may be a good option.
If you are serious about paying your tax bill, increasing your income is one of the best ways to do so. There are tons of things that you can do to make extra money.
You can sell those items online if your old clothes and shoes are in good condition. Poshmark, eBay, and Mercari are three places where you can list the items. Each platform gets tons of views, so your items will sell in no time. One way to speed up the sales is to list the item on each platform.
If you have a passion for writing, consider doing some freelance work. If you have a blog or some writing experience, that can be a huge advantage. You can list your services on Fiverr and Upwork. You may have to start off with lower prices, but the good thing is that you can increase them as you get more clients.
People are busy these days. If you like to drive, you can deliver food using Door Dash or Uber Eats. Depending on where you live, you could make good money doing this. You can also transport people around by driving Lyft or Uber. The weekend and big events are great times to turn on the app and find some riders. You can drive up to 12 hours daily if you have the time or need to.
The opportunities are endless. If you really want to increase your income, there are tons of things that you can do. Take some time to figure out which side hustle works best for you, and give it a shot.
Reduce Your Expenses
Reviewing your expenses and cutting back on some things can free up some money for your tax bill. You can cancel certain services for a few months. You can cut back on eating or going out. Do what you have to do until that tax bill is eliminated.
At the end of the day, you have to decide if paying off your tax bill is truly important to you. If it is, the ideas we just discussed can help you. You can do this. Get started and come up with a plan.