In 2018, more than 14 million individuals and business owners had open tax-debt cases against them. An IRS audit can be stressful, especially if you are unfamiliar with federal tax laws and policies. Owing taxes is equally frustrating as unpaid taxes carry severe consequences including garnishments and asset seizures. If you receive a letter from the IRS claiming that you have unpaid taxes, it is important to take immediate action. Here are some tips for dealing with the IRS and resolving your IRS tax problems.
Tip 1: Don’t Ignore the Issue
Ignoring problems will only make them worse. No matter the case, you should file your returns on time or file for an extension. There is a late filing penalty of 5% of the monthly tax owed which goes up to 25% of the balance. There is also an underpayment penalty of 0.5 – 1% per month on the balance owed, also capped at 25 percent. Not filing your tax return will only worsen your IRS tax problems.
Tip 2: Be Honest
The IRS rarely lets go of any tax debts. But in some special circumstances where a taxpayer is truly going through financial hardship, the IRS can settle the tax debt for less than what is owed. Form 656, an application for “offer in compromise” is given to individuals who have lost their jobs or have had significant healthcare expenses. If you’ve gone through something similar, you may qualify but it doesn’t happen too often.
Tip 3: Hire a Tax Relief Attorney
An experienced tax relief attorney can help you get better terms than when you take on the issue alone. They can also protect your credit rating by helping you avoid a tax lien assessment. Although a tax relief attorney can help with IRS problem resolution, beware of tax-debt resolution scams. If someone is promising impractical outcomes like complete elimination of interest for a fraction of what you owe, they are most likely duping you. Conduct a thorough background check before signing a contract.
If you have a tax debt that you cannot pay, don’t ignore it, rather, file your returns on time or ask for an extension. If the tax debt gets too high to handle, you may need to hire a tax relief attorney. A tax attorney can help you with IRS tax problems by streamlining your payments and making deals that don’t force you to disclose your assets. In certain cases, you don’t even have to pay liens.