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Step By Step Guide to Tax Resolution

According to 2018 IRS data, Americans owe $131 billion in back taxes, penalties, and interest. If you owe money, you know it's no fun to get IRS notices in the mail.

Sure, you can ignore them. That dagger hangs over your head; you know it's only a matter of time until you face a severe penalty. It may come sooner than you think.

The new Biden administration has signaled their desire to better fund IRS compliance officers. If you owe, now is the time to seek a tax resolution.

Do you want to know how to get on the good side of the IRS? Check out our easy, step-by-step guide.

Step 1: Stop Ignoring IRS Letters

A letter from the IRS is enough to give anyone pause. For far too many, especially for those who work low-income jobs in the hospitality industry, receiving a notice means you owe money you can't pay.

It's tempting to throw the letter away. Or ignore it until you have the money to deal with it.

Here's the truth. Wages for American workers stagnated during the last 40 years while the cost of living continues to rise. There may never be a "right" time to deal with back taxes.

Stop ignoring the letters and assess your situation immediately. Calculate how much you owe and what forms remain unfiled before you do anything else.

Step 2: Hire a Representative

If you're lucky, that IRS letter sitting in your mailbox might signify a minor issue. Most aren't that fortunate. Once you assess your overall tax situation, the next step you must take is to hire a tax resolution specialist.

Approaching the IRS alone is a stressful, time-consuming experience. If you're in a tax bind and looking to get out of it, the last thing you need is more stress.

The forms are complicated, and you're less likely to reach a sustainable outcome without the help of an expert.

Step 3: Apply for a Hold

Once you hire a representative to analyze your taxes, the next step is to apply for a collection hold. A hold gives you and your representative more time to execute a plan toward resolution.

If granted, a collection hold stops the IRS from wage garnishment or asset seizure.

Holds aren't guaranteed, and the IRS may reject your application. Should the IRS reject your application, your tax representative will know what to do next.

They'll either file an appeal or craft a payment plan to give you more time.

Step 4: File Missing Returns

What the IRS wants is compliance from citizens. The more you demonstrate your willingness to resolve your tax issues and pay what you owe, the less likely you will face severe penalties.

Part of this compliance is to file all of your missing returns. It may seem silly that people would forget to file or fail to file every year by April 15. There are, however, many people who neglect their filings.

Who Doesn't File?

Wealthy people play by a different set of rules. Lack of funding for compliance audits makes it easier for them to hide their assets or not pay.

Most of the rest fail to file because they cannot afford to pay. Workers in sectors where their income isn't taxed, like tipped employees, usually owe large sums of money.

If you know you owe money but find yourself in financial straits, you're less likely to file by the deadline.

Why Filing Missing Returns Is Important

To resolve, the IRS needs a full accounting of what you owe. They also want you to demonstrate your willingness to comply. Filing your missing returns is the only way to do this.

Filing missing returns isn't always easy. You might not have the proper paperwork like your W-2 forms. Your representative will know who to contact to find these absent forms.

They will then file, making every party aware of your current tax liability. It is after you've filed every neglected return that you can reach any resolution with the IRS.

Step 5: Resolution

Tax resolution isn't the same for every taxpayer. How you and your representative conclude depends on your current financial situation and how much you owe.


Negotiating a payment agreement once you comply with the IRS is far easier than you'd think. The firm will evaluate your current finances and propose a monthly payment.

Depending on your financial status, you may even qualify for a partial payment installation. If you pay on time and remain in compliance for ten years, they will forgive the remainder of your debt.

Currently Not Collectable

This resolution stops all wage garnishment and asset seizure, and those who demonstrate their inability to pay their debts can qualify. Your monthly income must be lower than your expenditures.

Though the IRS won't garnish your wages or your bank account, currently not collectible allows for a property lien.

An Offer in Compromise

An offer in compromise to the IRS is an agreement to pay a significant amount of your tax debt in one lump sum. The sum payment is less than what you owe.

The offer in compromise resolution is a challenge to obtain. You must prove you can pay the total amount you owe, and these negotiations are best handled by a professional.

Don't Delay Tax Resolution!

You may think you have good reasons to ignore an IRS notice. Financial stress is a way of life for most Americans, and it's easy to forget about what you can't pay.

Penalties and interest add up. The longer you delay tax resolution, the more you'll owe. Get on the right side of the IRS and lift that weight from your shoulders.

Do you need a tax representative? Katie Lawson PLLC is here for you. We'll help you reach a sustainable resolution for your tax issues. Contact us today to get started.


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