While taxes aren’t due until April, your stress levels may already be rising if you think you’ll owe taxes to the IRS. The True Resolve Tax Professionals in Denver are here to help. Today, we’ll provide you with tips on how to handle tax matters the smart way instead of creating an even worse situation that could be a detriment to your finances, your credit score and so much more.
So, let’s talk about what to do and not do if you think you’ll owe taxes to the IRS.
DON’T Avoid Filing Your Taxes
Running from a problem never helps. By not filing your taxes, you’ll face a 5% failure to file penalty for every month you owe taxes (25% maximum) along with a failure to pay penalty if you owe. And until your debt is paid in full, you’ll continue to rack up interest charges. Currently, the short-term rate is 3% and compounds daily. As you can see, the sooner the better is the smart way to go.
Also, if you don’t file a return, the IRS will eventually file a substitute tax return for you. And you can bet that their version won’t reflect every deduction, credit or exemption you may qualify to receive. Once the IRS has taken this step, they can begin to aggressively collect on your debt.
DON’T Ignore Your Tax Bill
Even if you file your taxes, you’re not out of the woods. You’ll need to address any amount you owe right away to protect yourself from the power the IRS wields to recover what’s owed. As we mentioned, you will first get stuck with a failure to pay penalty which is 0.5% of the tax owed after the due date, for each month or part of a month, up to 25%. Don’t forget interest! And that’s just the start:
- With an Individual IRS Lien, the IRS can file a legal claim against real estate, personal property and financial assets. Publicly filed, liens can damage your credit score.
- Using a levy, the IRS can wipe out your bank account and seize property or assets such as your home, car, and even future state and federal refunds.
- Last but not least, the IRS can garnish 70% or more of your paycheck. As a single taxpayer with one exemption, the most the IRS will give you to live off of each month is $862.50.
DO Contact a Real Tax Professional
Now that you see why it’s so important to file even if you think you’ll owe taxes to the IRS, what’s your first move going to be? Once tax season rolls around, you’ll start seeing tax preparation offices pop up in every strip mall, and commercials for fly-by-night tax debt relief companies will be all over TV and radio.
At some of the larger tax preparation companies, they often hire seasonal workers with no experience and simply provide a few tax courses to get them started. Not remotely reassuring if you’re in a tough situation! As for those “pennies on the dollar” tax debt companies that sound too good to be true, well, that’s the ruse – they rarely (if ever) are true. They’ll take your money and make big promises, but for you to actually qualify, you would need to prove to the IRS that you are completely broke, have zero assets and don’t have a job with a likelihood of earning more now or in the near future. The process is also long and complicated with no guarantee of a positive outcome.
If you think you’ll owe taxes to the IRS, the smart choice is an experienced and licensed tax professional, preferably an Enrolled Agent. You want the right skills, education, expertise, and someone who can act as your representative with the IRS. And that’s exactly what the True Resolve Tax Professionals provide:
- Tax Preparation, ensuring every exemption, deduction and credit you qualify for is applied to your return so that you pay the least amount of taxes possible. No stone is left unturned.
- Tax Resolution that works for you and your finances. We will explore all options to determine the right fit, whether an Offer in Compromise or payment plan – standard, partial or staggered.
- Tax Representation by experts who deal with the IRS all the time. We know how intimidating it can be for you to negotiate with the IRS. We will work directly with them on your behalf.
- Tax Planning that can help to lower your tax bill and keep more money in your pocket so you aren’t behind the tax game all the time.
At True Resolve in Denver, we can also look into IRS penalty abatement if your situation potentially fits the criteria, as well as provide you with further tax assistance and strategies to avoid further IRS issues. If you think you’ll owe taxes to the IRS, there’s no need to bury your head in the sand. We will help you take control and get the relief you deserve. To learn more, call now for a free 30-minute consultation.