Taxpayers throughout the country have voiced new frustrations about taxes the last few years. One common example: taxpayers who never owed a tax bill before found themselves owing the Internal Revenue Service (IRS) for the first-time last year and again this year. What went wrong?
In most cases, the problem lies within the taxpayer’s withholdings. In 2017, the Tax Cuts and Jobs Act (TCJA) led to the first major tax overhaul in decades. This change triggered a need for most taxpayers to review and adjust their withholding status. A failure to do so could result in the unexpected tax bill noted above.
Why did withholdings change?
Due to the new law, the government instructed employers to adjust their employee’s withholdings. In most cases, this led employers to decrease withholdings. Unfortunately, the recommendation led to many workers getting too much of a decrease and still owing additional taxes to the IRS at the end of the year.
Did the government fix the issue?
Unfortunately, not. The government expects you, the taxpayer, to review your tax obligations and make changes as needed. A failure to do so can result in more than just a surprise tax bill. If the taxpayer did not meet the majority of their tax payments throughout the year the IRS could also charge a penalty.
What if adjusted my withholdings but still owe a bill?
Other major life events can also impact tax obligations. Marriage, divorce, death and birth of children can impact our filings as well as a change of employment. If any or other qualifying life events occurred during the tax year, additional review of withholdings is warranted.
What if I cannot pay my bill?
Taxpayers with unmanageable tax bills have options. An attorney experienced in tax law can discuss these options, review your situation and go over the benefits and risks of each in your specific situation.