In my line of work, I come across many people who owe IRS money. While most employees have part of their pay withheld to satisfy their tax obligations, it’s still possible for them to fall into tax debt.
Since self-employed individuals have irregular income, they’re more likely to owe back taxes to the IRS. Other situations that might lead to tax debt include receiving an inheritance, selling an asset such as an investment home, winning the lottery, getting divorced, and tapping early into a 401(k) plan.
Important Points to Note if You Owe IRS Money
Never ignore any notice from the IRS. Ignoring correspondence from the tax agency won’t make your tax debt disappear. It only makes things worse since non-compliance only leads to more penalties.
Another piece of advice I give to my clients is to continue filing their tax returns even if they owe IRS back taxes. Other than showing the government that they’re serious about taking care of their tax obligations, it puts them in a better position to apply and qualify for options that might help with tax resolution. Such interests include IRS installment agreement and IRS offer in compromise.
Continuing to file taxes even if you owe IRS tax arrearages also makes it easier to settle your tax debt. Any refunds you might receive will be used to offset part of your debt to the tax agency which will ultimately reduce your burden.
Other critical points to consider:
- Hire qualified tax resolution experts. Like those found at True Resolve Tax Professionals, these professionals understand tax law and can negotiate with the IRS on your behalf.
We’re in a position to present you with suitable payment options regarding your tax debt. You might end up saving a lot of money and time.
- Always have representation when meeting the IRS. Meeting the IRS alone can be an intimidating experience which is why I advise you to have professional representation.
An IRS Enrolled Agent knows precisely how to present your case to the agency in a manner that will lead to the best possible outcome for you.
- Know your rights. Just because you owe IRS money doesn’t mean you won’t enjoy certain rights. The agency must give you notice in writing before taking any action against you or your property.
You also have the right to challenge such action legally. During interviews with the IRS, the law requires tax agents to treat taxpayers with professional courtesy.
- Retain all important documents. During the IRS settlement process, your records will play a significant role in getting you a good resolution with the agency. If you have all your paperwork in order, the process will be faster and smoother.
Some of these financial documents include bank, mortgage, and investment statements. It’s also a good idea to keep all correspondence received from the IRS as it will play a role in determining your case status initially.
The above points show how important it is for people who owe IRS tax arrearages to let tax resolution experts handle their IRS settlement cases. The professional insights we provide during such processes remarkably increase our clients’ chances of solving their tax debt issues as fast as possible.
How You can Settle Your Tax Debt
Finding out that you owe the IRS money can be a nerve-racking experience. Sometimes you might be tempted to consider taking on more debt to try and settle your tax debt. Before acting in haste, it is a good idea to weigh all your options and only settle for the best. As tax resolution experts, True Resolve Tax Professionals study each client’s situation and advise them on the best method of handling it.
Some of the most common IRS settlement methods we discuss are the IRS installment agreement, IRS offer in compromise, penalty abatement, and innocent spouse.
IRS Installment Agreement
We propose this method to clients with the aim of making their tax debt payment as manageable as possible. This allows them to settle with the IRS by making monthly payments until the debt is cleared. This option is very favorable as it gives taxpayers a period of up to six years to clear their debt.
Under this option, one can be eligible for either the streamlined installment agreement or partial payment agreement. It is also possible to pay the debt either via a tiered or full pay agreement. The particular method agreed upon will depend on the taxpayer’s financial standing.
IRS Offer In Compromise
If you owe IRS money and the tax agency determines that paying the amount in full will result in financial hardship, you might be eligible for an offer in compromise (OIC) option. This enables you to settle your tax debt for a lower amount than the IRS initially demanded. It’s easy to see why this option is popular among those who have tax debt. However, not all, in fact very few, taxpayers qualify for this option.
To qualify for OIC, you must demonstrate financial hardship. During the application process, you will be required to produce various financial documents that will be used later in evaluating your eligibility. Even after qualifying for OIC, the IRS may keep monitoring your financial ability to ensure you still deserve it.
This IRS resolution method significantly reduces your debt if you happen to owe IRS money. If you show that you did not intentionally try to defraud the government by failing to pay taxes, you might qualify for a partial or full waiver of any penalties imposed by the tax agency. Ignoring IRS correspondence puts you at risk of attracting punitive fines that will only make your tax debt larger.
This is why I encourage taxpayers to keep fulfilling their tax obligations even if they receive a tax debt notice from the IRS. Doing so shows their goodwill and helps to bolster their case should they ever seek a penalty abatement.
This method mainly applies to married taxpayers who operate joint accounts with their spouses. In case one of them neglects to fulfill their tax obligations, the other innocent party might still be held liable by the IRS. If you’re a victim of this misunderstanding, you can plead your innocence to the IRS.
However, I encourage my clients to act swiftly in exercising this option because the agency gives them a limited time window.
The particular IRS settlement method chosen will depend on each client’s circumstances. I encourage you to seek the services of a tax resolution professional who will study your case and advise you on the most suitable option.
It’s Time to Take Action
At True Resolve Tax, we help our clients put the information contained in this article to practice. Our years of experience in tax resolution coupled with our honesty and high ethical standards mean we’re a cut above the rest. If you owe IRS money, we have the solution to your problem. Do not hesitate to contact us. We’re committed to making sure your IRS settlement is not a stressful experience.