Americans who got a refund last year may have to pay a big tax bill this year. Many households living paycheck to paycheck count on their yearly tax refund as their single biggest lump-sum amount of income. Even those who adjusted their withholdings to make sure they would have enough money withheld from 2018 paychecks to give them some insulation from the new tax code may end up owing taxes this year.
Last year, the average refund was $2,100. This year, it’s $1,900. The IRS made some adjustments to withholdings resulting in fewer taxes coming out of paychecks. This means that if there’s a smaller refund, each paycheck throughout the year was probably a few dollars bigger than usual. Those who didn’t notice that small change but were still counting on a refund comparable to past years may be disappointed when they sit down to do their 2018 taxes.
If you owe federal taxes for 2018, you have a few options. File Form 9465 Installment Agreement Request, and set up payments right away. If you owe less than $25,000, the IRS must grant your request. Write a letter to the IRS and ask for an “abatement of penalties” to get penalties and the interest removed. There’s no need to charge your tax bill to a high-interest credit card. Work with the IRS to solve the problem.
