In 2020, Americans owed over $114 billion in taxes, penalties, and interest.
It's easier than you might think to fall behind on your taxes. You might end up with a situation where you didn't pay taxes throughout the year and didn't budget enough for the end, or things may have been piling on for a few years now.
If this happens, you'll have to work with the IRS to find a solution. Tax resolution can seem daunting, but it can be done in a way that isn't too stressful.
1. Don't Ignore the Problem
It might be tempting to ignore the IRS. Tax resolution can seem like it might cost you too much money, and you might want to ignore them and simply hope the problem goes away on its own.
This, however, can be dangerous. Chances are, if you ignore it, you'll simply wrack up interest and penalties over time, and the IRS can even press charges in the end.
Although it can be a scary thing to face, it's sensible to speak to the IRS as soon as possible when they contact you about tax resolution.
2. Get an Advisor
Finding tax resolution services is essential when dealing with this sort of problem.
One in four Americans doesn't actually understand how taxes work. This can be an issue, as it can lead to them falling behind in payments because they weren't sure how much they owe. It can also lead to overpayment or a severe lack of understanding about the penalties.
An advisor costs money, but it might end up being significantly less money than you'd pay the IRS without one.
Make sure you find an advisor who understands your situation and can work with you and the IRS to find a good solution.
3. Be Honest With Them
Even the best tax resolution specialist can't do a good job if you aren't honest with them. Don't try to lie or minimize the problem because you're embarrassed — instead, make sure you work with them to try and get a payment plan you're comfortable with.
If your advisor doesn't have all the information you need, then they won't be able to reach an agreement with the IRS that suits you.
Remember, this is their job, and they're used to meeting people in this situation. They're here to help.
4. Collect Records
When working with tax resolution companies and the IRS, you should ensure you have all records available so you and your advisor can constantly reference them. This will ensure no mistakes are made, especially mistakes that aren't in your favor and could be costly.
This process starts long before you ever get to an advisor though. In general, you should be saving records of income and expenses, even if it's just a Google Sheet that keeps track of everything.
That way, it's handy to go back to any time. The IRS also requires that you keep records, so doing this can save you from getting in trouble.
5. Be Realistic
When trying to come to a tax resolution, you should make sure you're realistic about what you can afford.
The shorter payment plan might seem good, as it means you'll owe the IRS nothing in no time, but are you sure you can actually afford it? If you can't, it might end up more trouble later when you start missing payments and accruing penalties. Then there's the hassle of having to renegotiate new terms.
Instead, pick a payment plan that seems realistic for you and that you're sure you'll be able to pay off.
6. Prioritize the Debt
You should also make sure you prioritize the debt.
It can be easy to forget about it or end with payments bouncing before you forgot it was coming out via direct debit every month. Set reminders to make sure you have the money in there.
It's also handy, if possible, to set your direct debit to be taken right after you get paid. That way, it's hard to avoid having money in the account when that date comes around.
It's important to set yourself up for success. Don't fall behind again because you didn't take taxes seriously enough, as it can only land you in more trouble.
7. Be Aware of Expiration Possibilities
If you've owed tax debt for a long time, you should be aware that it does expire in certain circumstances.
Generally, the IRS has ten years to collect unpaid tax. If it doesn't collect it in this time period, it has to write off the debt.
There are various things that can extend this period, however. Leaving the country, military service, and bankruptcy are all included in those things, so it can end up being much longer than ten years depending on your circumstances.
For the most part though, people will be faced with having to pay back the debt long before that time is up. It is something to be aware of if you have owed tax for many years, however, and struggled to pay it back.
Tax Resolution Takes Time
Tax resolution takes time if you've wracked up bills and can seem like a very daunting prospect. You might be tempted to ignore the problem and hope it goes away.
The most efficient way to make tax debt disappear, however, is to work openly and honestly with the IRS and a qualified advisor.
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f you need tax resolution help in Durham, North Carolina, contact us today. We're a one-stop shop for all tax services and would be happy to help.