Here’s How To Deal With a Big Tax Bill Without Freaking Out
Certain things in life aren’t worth a major freakout. Spill the milk? Eh, just wipe it up. Other things are much harder to fix, like a big tax bill. When Uncle Sam expects a lot of money from you, you could be forgiven for panicking — especially if that big bill seems to come out of nowhere.
MoneyLion is going to give you a pat on the back — or even a hug, if you need it — and reassure you that this situation is manageable. There are ways to deal with a big tax bill that don’t involve suffering, freaking out or going broke.
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1. File on Time, No Matter What
If the thought of filing your taxes makes you want to do an impression of an ostrich, that’s understandable. But putting your head in the sand and refusing to file won’t make your tax woes go away — it’ll actually make them worse.
Don’t just take our word for it. Here’s what the IRS website says: “It’s important for taxpayers to file their tax return or request an extension of time to file at IRS.gov/extension … even if they can’t pay their full tax bill. Doing so will help them avoid a failure-to-file penalty.”
In other words, filing, even without full payment, keeps penalties from piling up fast.
2. Pay What You Can Upfront
To avoid getting hit with those pesky penalties and interest payments, your best bet is to pay what you can as soon as possible. Just know that the IRS doesn’t expect you to forfeit your rent or grocery money — don’t go without the necessities.
That said, any amount you can reasonably pay now can reduce how much you’ll owe later, since interest accrues on the remaining balance.
3. Know That You Don’t Have To Pay Everything at Once
Your panic is likely driven by fear. Since you can’t pay everything at once, you may be gripped with terror of being tossed into jail or financially ruined. Those outcomes are extremely rare and usually tied to serious tax evasion, not ordinary taxpayers who owe money.
In reality, the IRS is not out to get you. If you contact them proactively, you may have several repayment options, including:
Short-term payment plans
Long-term installment agreements
An offer in compromise
Penalty relief
Hardship or currently-not-collectible status
You can learn more about these options on the IRS website. Reaching out early can make repayment far more manageable.
4. Look for Reasonable Ways To Pay Your Taxes
When you’re scrambling to pay a big tax bill, you might be tempted to reach for any shortcut available — even one that could bury you in high-interest debt, like a payday loan or high-interest credit cards.
There are better ways to come up with the cash, even if you have to get a little creative. The AARP website offers a few ideas, like selling investments or dipping into your emergency fund. Boosting income through freelance work, overtime or a side hustle can also help you chip away at what you owe.
5. Adjust Your W-4
Once you’ve dealt with this year’s tax bill, the last thing you want is a repeat performance. That’s where your W‑4 comes in. If you owe a large amount at tax time, it may mean your employer didn’t withhold enough from your paycheck throughout the year.
Updating your W‑4 can help prevent another shock next April. The IRS offers an online Tax Withholding Estimator to help you determine how much should be withheld from future paychecks.
The Bottom Line
Feeling better now? A big tax bill isn’t fun, but it doesn’t have to cause panic. If you file on time, pay what you can, explore payment options and adjust your withholding, you’ll be breathing easier before you know it.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal, or tax advice.
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