How to handle, and head off, a tax bill

Tax season can be a windfall or a wipeout for your budget. Which camp you fall into likely depends on whether you get a refund — or a tax bill — from the IRS.

If you find that you owe taxes, you’re not alone. Over 23 million Americans owed the IRS a balance in 2019, a nearly 6% increase from the year before, according to a 2019 report from the Taxpayer Advocate Service, a government organization that represents taxpayers.

Owing the IRS isn’t fun, sure, but handling your debt the right way prevents more expenses and trouble. Then, you can take a simple step to avoid a tax bill next year.

Facing a tax bill? Make sure you file

So you’ve run your tax information through your favorite online service or hired a tax professional and found that you owe the IRS. Your first reaction may be to avoid filing, but that makes things worse, says Kathy Pickering, chief tax officer at tax preparation company H&R Block.

“When people find out they owe, they sometimes just get panic-stricken and they don’t file because they can’t afford to pay,” Pickering says.

But not filing is risky. You can leave yourself vulnerable to fraud: If a scammer has your Social Security number, they can file a return in your name, making up false numbers to grab a refund. And not filing on time will limit your payment options with the IRS.You also may incur penalties and fees.

Find the best (and cheapest) p ayment option for you

Even if you’re paying off other forms of debt, put the IRS at the top of your list. Failing to pay can be costly and result in liens.

“You should prioritize tax debt because the interest and penalties you owe to the federal government or a state is not tax-deductible and it can