Filing your taxes can be a stressful experience, especially if you receive a notice that you owe the IRS money! This is known as a balance due on your tax return, and it means that you must pay the amount listed in full by the deadline.
Let’s break down what this means for taxpayers and how to best handle this situation.
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What is a Balance Due?
A balance due is an amount of money that must be paid to the Internal Revenue Service (IRS) after submitting your tax return. It can occur when the taxpayer owes more money than they have paid in taxes throughout the year or if there are any discrepancies between income reported and deductions claimed.
A balance due could also occur because of unpaid back taxes or penalties from previous years.
How Could You Have a Balance Due?
If you are an employee with income, you will most likely receive a W-2 form from your employer at the end of each tax year. This form includes all of your wages earned throughout the year as well as any other payments made by your employer, such as bonuses, commissions, or severance pay.
On the other hand, if you are self-employed or own rental property, you may receive 1099 forms instead of W-2 forms. The difference between these two forms is that 1099 forms do not come with taxes withheld whereas W-2 forms do come with taxes already taken out.
Therefore, individuals who earn income through 1099 forms may have higher chances of owing money to the IRS since they would have had to pay their estimated taxes throughout the year rather than having them automatically withheld from their paycheck like those who receive W-2s do.
Additionally, failing to accurately report your income or taking too many deductions when filing can lead to balance dues as well.
What Happens When You Have a Balance Due?
The IRS will send out an official notice confirming that you owe them money and list both your owed amount as well as any applicable penalty fees associated with it.
To pay off this debt in full, taxpayers usually have three options: mailing in check or money order; paying online; or calling to arrange payment over phone.
It is important to note that interest charges apply to balances due after April 15th unless payment arrangements were previously made with IRS before then; additionally, penalties can increase up to 25% if not paid within 21 days after receiving notification from IRS.
If you find yourself facing a balance due on your tax return this year, don’t panic! There are ways to take care of it quickly and efficiently before incurring any hefty fines and penalties imposed by IRS for late payments so long as all necessary steps are taken upon receiving notification from them regarding what needs to be paid back in full before its deadline passes.
By understanding what led up the creation of this debt in first place and taking proactive steps towards resolving it promptly—whether via mail-in payment methods or online—taxpayers can rest assured knowing that their finances will remain in good standing with IRS for years ahead.
